SWOT Analysis of City Bank

Letter of Transmittal

Date: 01-08-2013

Md. Rashadur Rahaman Lecturer

University of South Asia

Sub: - Submission of the Assignment.

Dear Sir,

I beg most respectfully to state that I am the students of University of South Asia of BBA

department have done a research .This report sets on “SWOT Analysis of City Bank” in

Bangladesh, That you have assigned us on different lectures in this semester.

I am prepared this report. In preparing this report, I am followed your guidelines. As per your

direction, I am added a lot of information from the mentioned topic. From this report I have

achieved a lot of basic knowledge and we think ourselves that it will help me a lot in our future

career. I sincerely hope this report will fulfill the requirements suggested by you under the course

Organizational Behavior. I truly appreciated this report. I hope it will be accepted by you. If you

have any question after reading this report, let me know. I will be available for any further

inquiries whenever you call me Thanks’.

Sincerely Yours,

Md. Mazharul Islam Rana

ID: 111-0072-001

Students of university of South Asia

(Subject: Business Environment)

Program: BBA (20th Batch)

Acknowledgement:

I have to thank the City bank accusations’, abbess, Authority they help me and give some idea about

this assignment. Who help me giving tips, suggestions & valuable advices regarding the report.

Special thanks go to our honorable course teacher Mr. Rashadur Rahaman, Lecturer, University of

South Asia.

This assignment is the result of many people’s contributions & help. At this moment we to think

those people who extended their help providing suggestions & advices.

I also want to make thanks to those writers whose books helped me to make this valuable report &

also thanks Bank Asia Limited to provide important information & also the City Bank Website’s.

My all friends who are in the following helped me lot. Thank you all.

This assignment is the result of many people’s contributions & help. At this moment we to think

those people who extended their help providing suggestions & advices.

I also want to make thanks to manager of City Bank, Mirpur-10 Branch to help me a lot to prepare

this Assignment.

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Executive Summary: SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. The SWOT-landscape

grabs different managerial situations by visualizing and foreseeing the dynamic performance of

comparable objects according to findings by Brendan Kitts, Leif Edvinsson and Tord Beding

(2000). It can be used for a number of decision making requirements and enables proactive thinking

rather than relying on habitual or instinctive reactions.

The City Bank Ltd is started its journey as a private commercial bank in 1983 with a mission to

provide service to its clients and make its position unique in giving quality service to all institutions

and individuals that they care for. This study covers the details of The City Bank’s practices about

credit management activities emphasizing the approval and monitoring process.

In 2009, Credit Risk Management division (CRMD) has taken lot of initiatives to protect the interest

of the Bank from the credit risk perspective. Credit risk at CBL governed by Credit Policy Manual

(CPM) which was amended according to the business needs as well as risk management is

concerned. There are many types of loan in City Bank, which takes customer to fulfill their needs.

Such as- Retail loan ,Corporate loan ,SME loan. Loans and Advance of the bank as on December

31, 2009 stood at BDT 43,486 million compared to BDT 34,4201 million of previous years reflecting

a staggering growth of 26%. This growth was the result of the strong drives undertaken by the

bank’s C&I and SME divisions with strong focus on good names, strong credit risk and good

security structure.

The table shows that, the yield on loans and advances in 2009 is 13.07% compared to 13.50% in 2008 which shows a decreasing trend. But from 2004 to 2008 there is an increasing tendency in loans and advances.

The picture of last 5 years Price Earnings Ratio

Particulars 2005 2006 2007 2008 2009

Price Earnings Ratio

(Times)

10.24

19.31 15.09 17.82

14.00

The picture of last 2 years NPM

PARTICULARS/ years 2007 2008 2009

Net Profit after Tax (mn) 343.46 398.11 818.72

Total operating Income (mn) 2572 3,380 4,368

Net Profit Margin 13.35% 11.78% 18.74%

The picture of last 3 years DR PARTICULARS/YEARS 2007 2008 2009

Total Liabilities 45881.04 52897.099 70602.57

Total Asset 48755.40 57114.58 76466.802

Debt Ratio 94.11% 92.62% 92.33%

The picture of last 5 years

PARTICULARS/YEARS 2005 2006 2007 2008 2009

Operating Cost (BDT mn) 861.014 1155.457 1316.316 1625.372 2112.244

Total operating Income (BDT mn) 2109.868 2650.154 2572.193 3380.292 4367.88

Operating Cost to Income Ratio 40.81% 43.61% 51.175% 48.10% 48.36%

Sunday April 18th, 2010, 7pm. Resorts World Convention Center, Singapore. The Leadership Award

Gala Dinner, the region’s highest possible award ceremony for leadership in financial services, is

well on its course featuring a black-tie event and all outstanding leaders from the Asia Pacific and

Middle East regions. Among the many dignitaries and luminaries in attendance, many of whom are

Chairmen and CEOs of banks and also the global leaders, there can be seen the presence of

individuals as notable as Sir George Mathewson, the former chairman of RBS and Mr Neel

Kashkari, the former under-secretary of finance of the United States government and the head of the

TARP program during the Bush administration. City Bank Chairman

Mr Aziz Al Kaiser was present at the event; and he is holding the “Strongest Bank in Bangladesh” award in

the above photograph while Mr Sattar is seen holding his award for “Leadership Achievement”.

The bank should recalculate its lending rate on a periodic basis to cope up with changing lending

scenario.

Care should also be taken so that good borrowers are not discarded due to strict adherence to the

lending policy. To expedite the lending process, board credit committee meeting should be held twice a month

instead of once a month.

In case of assignment, the bank must ensure that the assignment debtor has given undertaking.

In case of mortgage, care must be taken to accept collateral on second charge.

At the branch level, credit department must be adequately capable of collecting the correct and

relevant information and analyzing the financial statements quickly and precisely.

Bring down NPL ratio further.

For significant performance, the bank has earned National and International recognition. The City

Bank Limited was one of the 12 Bangladeshi Banks among the 500 Banks in Asia for its assets,

deposit and profit as evaluated by “Asia weak” in the year 2000. Besides that bank received “Top

Ten Company Award” from the Prime Minister of the Peoples Republic of Bangladesh in the year

1992-93 which was declared by Securities and Exchange Commission

What is SWOT analysis:

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some

measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control.

SWOT Analysis is the most

renowned tool for audit and analysis of the overall strategic position of the business and its environment.

Its key purpose is to identify the strategies that will create a firm

specific business model that will best align an organization’s resources and capabilities to the requirements of the environment in which the firm operates. In other words, it is the foundation for

evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external

environment. It views all positive and negative factors inside and outside the firm that affect the success. A consistent study of the environment in which the firm operates helps in forecasting/predicting the changing trends and also

helps in including them in the decision-making process of the organization.

Beginning List of SWOT Questions:

Press button for Strengths

What is golden about your company?

What do you do well (in sales, marketing, operations, management)? What are your assets? What are your core competencies?

Where are you making money? What experience do you have?

Press button for Weaknesses

What looks a bit rusty inside your company?

What do you need (customer service, marketing, accounting, planning)? Where do you lack resources?

What can you do better? Where are you losing money?

Press button for Opportunities

Where is the blue sky in your environment? What new needs of customers could you meet? What are the economic trends that benefit you?

What are the emerging political and social opportunities?

What are the technological breakthroughs? Where niches have your competitors missed?

Press button for Threats

Where are the red alerts in your environment?

What are the negative economic trends?

What are the negative political and social trends? Where are competitors about to bite you? Where are you vulnerable?

SWOT - landscape analysis:

The SWOT-landscape systematically deploys the relationships between overall objective and

underlying SWOT-factors and provides an interactive, query-able 3D landscape.

The SWOT-landscape grabs different managerial situations by visualizing and foreseeing the dynamic performance of comparable objects according to findings by Brendan Kitts, Leif Evensong and Tord

Beding (2000).

Changes in relative performance are continually identified. Projects (or other units of measurements)

that could be potential risk or opportunity objects are highlighted. SWOT-landscape also indicates which underlying strength/weakness factors that have had or

likely will have highest influence in the context of value in use (for ex. capital value fluctuations)

SWOT ANALYSIS FRAMEWORK

Advantages of SWOT Analysis: SWOT Analysis is instrumental in strategy formulation

and selection. It is a strong tool, but it involves a great subjective element. It is best when

used as a guide, and not as a prescription. Successful businesses build on their strengths,

correct their weakness and protect against internal weaknesses and external threats. They

also keep a watch on their overall business environment and recognize and

exploit new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner-

a. It is a source of information for strategic planning. b. Builds organization’s strengths.

c. Reverse its weaknesses. d. Maximize its response to opportunities.

e. Overcome organization’s threats. f. It helps in identifying core competencies of the firm. g. It helps in setting of objectives for strategic planning.

h. It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities

with the competitive environment in which the firm operates.

Why is a SWOT Analysis important to your business?

It can be used for a number of decision making requirements and enables proactive thinking

rather than relying on habitual or instinctive reactions.

It is versatile in that it can be used for both personal and business issues.

It enables a team leader to define and develop goal-oriented actions, together with specific and agreed objectives.

By getting collective agreement to the Analysis, the commitment of those responsible for any

implementation to the proposition will be encouraged.

It can uncover opportunities that the company is well placed to take advantage of and by

understanding the weaknesses of your business, you can manage or eliminate threats that otherwise

could have come as a surprise to you.

Limitations of SWOT Analysis:

SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as very simple because of which the organizations might overlook certain key strategic contact which may occur. Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats

might be very subjective as there is great degree of uncertainty in market. SWOT Analysis does stress upon the significance of these four aspects, but it does not tell how an organization can identify these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of management. These include-

a. Price increase;

b. Inputs/raw materials; c. Government legislation;

d. Economic environment;

e. Searching a new market for the product which is not having overseas market due to import restrictions; etc.

Internal limitations may include-

a. Insufficient research and development facilities;

b. Faulty products due to poor quality control; c. Poor industrial relations;

d. Lack of skilled and efficient labor; etc e.

SWOT Analysis Template

Here is a SWOT Analysis template with some examples filled in:

Strengths Weaknesses

Political support

Funding available

Market experience

Strong leadership

Project is very complex

Likely to be costly

May have environmental impact

Staff resources are already stretched

Opportunities Threats

Project may improve local economy

Will improve safety

Project will boost company's public image

Environmental constraints

Time delays

Opposition to change

Below is an example SWOT analysis of a market position of a small management consultancy with specialism in HRM.

Strengths Weaknesses Opportunities Threats

Reputation in marketplace Shortage of consultants

at operating level

rather than partner

level

Well established

position with a well

defined market niche

Large consultancies

operating at a minor

level

Expertise at partner level in HRM

consultancy

Unable to deal with

multi-disciplinary

assignments because of

size or lack of ability

Identified market for

consultancy in areas

other than HRM

Other small

consultancies looking to

invade the marketplace

References: "SWOT Analysis for Management Consulting". SRI Alumni Newsletter

City Bank Limited:

The City Bank Ltd is started its journey as a private commercial bank in 1983 with a

mission to provide service to its clients and make its position unique in giving

quality service to all institutions and individuals that they care for. The City Bank Ltd is a private bank in Bangladesh that came in banking sector with big promise. It is one of the promising

commercial banks, operating nationwide wide 87 branches.

The main purpose of the report is to provide a basic idea that I gathered from my internship period. Basically I focused on credit management of the bank. City Bank Ltd provide both funded and non-

funded loan. It has full of product lines for Consumer Credit Scheme (CCS), Small Enterprise (SME) and for Large & Medium (LM) organizations.

The product program guidelines are also so structured. All the products are not equally operative.

The most operating loan’s guidelines are discussed in the report.

The demand for industrial loan is increasing. In data analyzing part it is shown that the CCS loan demand and interest income is increasing for all banks except City Bank Ltd. the bank management should give concentration to improve this situation as the market is so competitive. They can

introduce more diversified Credit or loan to increase demand.

Bangladesh Bank has identified some sectors, in which to invest more and discourage some sectors to invest. Some credit performance related ratios such as net Interest Ratio, Risk Ratio, Loan Ratio,

and Interest Expense Ratio are calculated. To get internal and external view of the bank SWOT analysis is done. This analysis gives a view of the banks strengths, weakness, opportunity and threats; which helps to give some suggestions that the bank could follow.

In the last part there is some findings of the banks, recommendations and draw a conclusions about the bank performance.

Introduction:

Commercial banks are profit-making institutions for which they have to ensure better asset quality.

The strength of a bank is primarily judged by the soundness of its advances, thus the advances must permit the changing of a reasonable time and without undue difficulty. Successful lending depends upon sound judgment and accurate knowledge of the character and credit worthiness of the

borrower.

The prosperity of a country depends upon its economic activities. Like any other sphere of modern socio- economic activities, to banking is a powerful medium of to ringing about socio- economic

changes of a developing country. Agriculture, commerce, & industry provide the bulk of a country’s wealth, without adequate banking facility these there cannot flourish. For a rapid economic growth, a fully developed banking system can provide the necessary boost. The whole economy of a country

is linked up with banking system. The function of the bank are now wide & diverse of all the function of a modern bank, lending is by far the most important. All that a banker always deals in credits

know it. He is a credit receiver (the deposits) and a credit giver (the loans & advances) banker mobilizes the small & scattered savings of the community and makes them available for investment in productive purposes.

Accordingly, before allowing credit bank should have confidence in the borrower’s ability and

willingness to repay the loan. Because all lending involves some degree of risk and it is necessary

for any bank to keep the risk to a minimum. Thus, the banker before making an advance must consider its safety liquidity & profitability, for which proper & good selection of borrower is

necessary.

Objectives of the study:

The objectives of this report are:-

To provide an overview of the existing loan product and services offered by City Bank’s credit division.

To know about the requirement, procedure to get a loan, repayment system and customer attitude towards it.

To evaluate the credit performance of the bank. To identify strength and weakness as well as different Ratios analysis of City bank Ltd. To offer pragmatic suggestions for the improvement of their credit performance.

Scope of the study:

This study covers the details of The City Bank’s practices about credit management activities emphasizing the approval and monitoring process. This report consists of my observations in the credit departments of Principal Branch of the City Bank Limited. The study mainly emphasizes the

sequential activities involved in credit approval process, analytical techniques used by The City Bank for credit analysis as an essential part of the credit activities. The study also focuses on the

loan monitoring techniques adopted by The City Bank Limited both in pre-sanction and post- sanction period of a credit. The study compares between the various sections of credits. Finally, the study incorporates an evaluation of the different aspects of the credit activities and monitoring

techniques and makes some recommendations about it.

Methodology of the study:

The report is prepared on the basis of secondary sources of information. They are as follows-

Secondary Source:

Annual report of The City Bank Ltd.

File balance sheet and various documents Different textbooks & materials Website of The City Bank Limited

Reports submitted by several internship students

Organization of the report:

The organization of the report is based on five chapters. In the first chapter I introduced about the topic of the report, its scope, preparation methodology, limitations of the report,

and a glance of City bank Ltd. And its product generally offered to the customers.

The second chapter described about the term credit, credit risk management division, products of credit division, credit policies and practices, documentation of loan, securities, loan handling, credit

processing steps etc.

In third chapter I have included the credit performance of CBL, and its ratio analysis. In the fourth chapter there is SWOT analysis and comparison with other banks. In the last chapter there are

findings of the report, recommendations and conclusions.

Limitations of study:

From the intention to make the report realistic and properly accepted this report has been conducted. However, many problems appeared in the way of conducting the study. All the given

information is not fully complete. Some of the information is company secret and important and only provided to some persons to know about it.

However, I try my best to settle and pass up the Report before the due date and hoping it was

satisfied. The study considers following limitations:

Lack of in-depth knowledge and analytical ability for writing such report. Another limitation of this study is bank’s policy of not disclosing some data and information

for obvious reason, which could be very much useful.

In case of the secondary data collection, there were very few secondary information was available. There were few supporting books, report, journals et

Lack of experience to analyze data. Time limitation is also a big factor, which hinders the data collection process. Due to time

limitation many aspects could not by discussed in the present study.

Poor conception of the discussed group was another severe problem that created a lot of confusion regarding verification of the conceptual data. In some cases more than one person

were interviewed to clarify each concept.

Company Overview- The City Bank Limited:

City Bank is one of the oldest private Commercial Banks operating in Bangladesh. It is a top bank among the oldest five Commercial Banks in the country which started their operations in 1983. The

Bank started its journey on 27th March 1983 through opening its first branch at B. B. Avenue Branch in the capital, Dhaka city. It was the visionary entrepreneurship of around 13 local businessmen who braved the immense uncertainties and risks with courage and zeal that made the

establishment & forward march of the bank possible.

Those sponsor directors commenced the journey with only Taka 3.4 crore worth of Capital, which now is a respectable Taka 330.77 crore as capital & reserve. City Bank is among the very few local

banks which do not follow the traditional, decentralized, geographically managed, branch based business or profit model. Instead the bank manages its business and operation vertically from the head office through 4 distinct business divisions namely

1. Corporate & Investment Banking;

2. Retail Banking (including Cards); 3. SME Banking;

4. Treasury & Market Risks.

Under a real-time online banking platform, these 4 business divisions are supported at the back by a robust service delivery or operations setup and also a smart IT Backbone. Such centralized business

segment based business & operating model ensure specialized treatment and services to the bank’s different customer segments.

The bank currently has 88 online branches and 10 SME service centers and 1 SME Agro center

spread across the length & breadth of the country that include a fully fledged Islamic Banking branch. Besides these traditional delivery points, the bank is also very active in the alternative

delivery area. It currently has 77 ATMs of its own; and ATM sharing arrangement with a partner bank that has more than 550 ATMs in place; SMS Banking; Interest banking and so on. It already started its Customer Call Center operation. The bank has a plan to end the current year with 100

own ATMs.

The products and Services:

The City Bank Limited launched several financial products and services since its inception.

Contributory Saving Scheme

Consumer Credit Scheme ,Monthly Benefit SchemeLease FinanceSpecial Deposit Scheme Cash

credit (Hyp)Education Saving SchemeCash Credit (Pledge)Marriage Saving SchemeTerm LoanFixed DepositHouse Building FinanceSaving Deposit AccountSOD (FO)STD AccountSOD

(WO)Current Deposit AccountTransport LoanCBL-insured Fixed Deposit SchemePADMonthly Savings SchemeLIMMulti Currency AccountLTRForeign Currency Deposit AccountAdv. Against Cash IncentiveNon Resident Taka AccountDemand LoanNon Resident Foreign Currency

AccountExport Development FundNon Residents Investors AccountSmall and Medium EnterpriseCity SomriddhiCity Bank Credit CardCity IcchapuronCity Solution City Drive City

Express American Express Card (AMEX)

Credit Risk Management division:

In 2009, Credit Risk Management division (CRMD) has taken lot of initiatives to protect the interest of the Bank from the credit risk perspective. Credit risk at CBL governed by Credit Policy Manual

(CPM) which was amended according to the business needs as well as risk management is concerned.

Vision: 2010:

Maintain a high standard credit quality, control & compliance in place Bring down NPL ratio further

Basel II guidelines implementation in terms of content & sprit Promote continuous on the job local and overseas training.

Products of Credit Division:

There are many types of loan in City Bank, which takes customer to fulfill their needs. Such as-

a) Retail loan = Most types of loan processing from here. These Are:

City Express City Solution

City Drive City Credit Card

City Scholar City Double Loan

b) Corporate loan = Big company/organization are including here.

c) SME loan = Small/Medium entrepreneur are including here.

Credit policies & practices:

Loan AmountLocal Classic/Silver CardBDT 10,000 – BDT 49,000Local Gold CardBDT 50,000 – BDT 500,000Dual Classic / Silver CardBDT 10,000 – BDT 49,999+US$

100 – US$ 1,999Dual Gold Card

BDT 50,000 – BDT 500,000

US$ 1,000 – US$ 3,000

Credit information:

Any credit worthy individuals like: salaried executives, professionals like doctors, architects, engineers, chartered accountants, consultants, IT professionals and businesspersons etc. can apply for this loan.

1. City Solution Features:

Loan amount ranting from Tk.50, 000 to Tk. 10, 00,000

Loan tenor 12 to 60 months No guarantor required for the loan amount up to Tk. 3 lac*

Competitive interest rate Processing fee 1.5%

Eligibility:

Age: 22 to 60 years Experience: Salaried executive total 1 year including 6 months with current employer,

Businessperson 2 year and professional 1 year Minimum monthly income: Salaried executive Tk.15, 000, Self employed Tk. 25,000 and

businessperson Tk. 30,000

2. City Drive Features:

Loan amount ranging from Tk. 3, 00,000 to Tk. 20, 00,000

Car financing up to 90% of reconditioned or new vehicle price Lower interest rate & up to 100% financing for loan against cash security

Loan tenor 12 to 60 months No hidden charges Loan processing fee 1% of loan amount

Eligibility:

Age: 22 to 60 years Experience: 1 year for Business person, and also 1 year for Salaried executive including 6

months with current employer Monthly income: Minimum Tk. 30,000

3. CBL Credit Card Features:

Some of the Important features of it given below:

Interest Free Days: Minimum 15 & Maximum 45 Days CBL Dual Currency ‘CITYCARD’ is accepted all over the world Balance Transfer

Flexi-Pay/Installment Payment Lower Annual/Renewal Fee

Convenient Payment Option Eligibility:

Age: Primary Card-18 to 60 years Supplementary-18 to 60 years

Target market: Salaried Executive Self-employed

4. City express Features:

Loan amount ranging up to 90%-95% of FDR Lower interest rate only 3%

No guarantor required for the loan amount No hidden charges

Competitive interest rate Eligibility: Everyone can take this loan, which have any FDR in this Bank

5. City Scholar Features:

Secured overdraft facility –value can be up to 95% of the security deposit.

Unsecured facility – loan amount up to Tk. 10 Lac Quick processing time Interest rate lower than other competitive products

Student file service facility Eligibility:

This education loan is designed to meet any type of educational financial need of a student. Any creditworthy individual can avail this loan facility for his/her offspring or for himself/herself.

6. City Double Loan Features:

Fully secured loan in the for up to 95% of FD value

Unsecured loan for up to Tk. 10 Lac payable in Equal Monthly Installments (tenor ranging from 12 to 60 months).

Zero processing fee for the overdraft facility Interest rate lower than other competitive products

Eligibility: Any credit worthy individuals like: salaried executives, professionals like doctors,

architects, engineers, chartered accountants, consultants, IT professionals and businesspersons etc. can apply for this loan.

Credit processing steps: Fig:-2.10.1 Credit Activities followed by the City Bank Ltd.

Credit principles/Principles of Lending:

Banks are profit-oriented organization for which a bank invests its funds in many ways to earn income. At the same time bank runs the risk of default in repayment. As such, the banks are required

to follow certain basic principles of lending. These principles are-

v Know Your Customer: Know your Customer (KYC) is the most important guiding principle of The City Bank Ltd. for extending credit facilities to its prospective borrowers. Complying with this

principle helps the bank to avoid money laundering crime and adverse selection of borrowers.

v Safety: Safety depends first upon The security and its value offered by the borrower and The repaying capacity and willingness of the borrower to repay the loan with interest.

v Liquidity: It refers to ability of an asset to be converted into cash without loss and within a short time to meet depositor’s demand for cash.

v Profitability: The City Bank Ltd. must employ its fund in such a way that they will bring adequate return for the bank, which should be more than cost of the funds.

v Purpose: The purpose for which The City Banks will provide loan should be productive so that the

money not only safe but also provides a definite source of repayment.

v Spread: It refers to the diversification of advance. So far, The City Bank Ltd. could maintain considerable margin on its disbursed loan but recently Bangladesh Bank has imposed restriction on

lending rate and to comply with Bangladesh Bank policy guidelines, The City Bank Ltd. lowered its lending rate.

Credit Supervision and Monitoring techniques in The City Bank Ltd:

Lending always involves risks as discussed before. The primary and the most important risk

associated with a loan is default risk or the borrower to repay the loan with interest. To protect loan assets from being nonperforming The City Bank Ltd. both in the pre-sanction and in the post-sanction stage or for ongoing credit does assets effective supervision and monitoring. In simple

words, supervision and monitoring of a loan denotes continuous checking and assessing the borrower, his business, and his willingness to repay the loan based on some predetermined manners.

Purpose of Credit Monitoring in the City Bank Ltd. – are pointed out below-

To prevent loan classification To return flow of fund To ensure compliance of terms and conditions

To obtain feedback from the borrowers To take timely corrective action regarding a particular loan

a) Credit Administration as a Tool for Credit Monitoring

To ensure that all security documentation complies with the terms of approval and is

enforceable. To control loan disbursement only after all terms and conditions of approval have been met,

and all security documentation is in place.

To maintain control over all security documentation. To monitor borrower’s compliance with covenants and agreed terms and conditions, and

general monitoring of account conduct/performance.

To minimize credit losses, monitoring procedures and systems should be in place that provides an early indication of the deteriorating financial health of a borrower.

Past due principal or interest payments, past due trade bills, account excesses, and breach of

loan covenants. Loan terms and conditions are monitored, financial statements are received on a regular

basis, and any covenant breaches or exceptions need timely actions.

Timely corrective action is taken to address findings of any internal, external or regulator inspection/audit.

An Early Alert Account is one that has risks or potential; weaknesses of a material nature requiring monitoring, supervision, or close attention by the management.

Moreover, regular contact with customers will enhance the likelihood of developing strategies mutually acceptable to both the customer and the bank.

Determine Account Action Plan Recovery Strategy. Ensure adequate and timely loan loss provisions are made based on actual and expected

losses.

Regular review of worse accounts.

b) Risk Grading as a tool of Credit Monitoring

The system should define the risk profile of borrower’s to ensure that account management, structure and pricing are commensurate with the risk involved. Risk grading is key measurement of a

Bank’s asset quality, and as such, it is essential that grading is a robust process. All facilities should be assigned a risk grade. It is recognized that the banks may have more or less risk grades; however,

monitoring standards and account management must be appropriate given the assigned Risk Grade.

Credit Performance of The City Bank Limited:

Particulars 2005 2006 2007 2008 2009

Loans and Advances(In BDT

Million)

23,788.47 30,789.02 26,788.47 34,420.94 43,486.42

Loans and Advances(Growth in percentage)

37% 32% -13% 28% 26

Table: The Growth rate of CBL Loans and Advances since last 5 years Loans and Advance of the bank as on December 31, 2009 stood at BDT 43,486 million compared to

BDT 34,4201 million of previous years reflecting a staggering growth of 26%. This growth was the result of the strong drives undertaken by the bank’s C&I and SME divisions with strong focus on

good names, strong credit risk and good security structure.

Particulars 2005 2006 2007 2008 2009

Total loan and advances 23,326.24 30,789.02 26,788.47 34,420.94 43486.42

Non-Performing Loan (NPL)

over total loans and advances in

(%)

5.71%

Table: Non-Performing Loan (NPL) of CBL over last 5 years

7.18%6.24%6.30%

4.87% Particulars 2009 2008

Agricultural Industries 1% 1.61%

Large and Medium Industries 52% 31.24%

Small and Cottage Industries 2% .049%

Commerce and Trade Industries 24% 38.94%

Insurance, Real Estate and Service Industries 0% 2.43%

Transportation and Communication Industries 3% 2.49%

Others 18% 22.79%

TOTAL 100% 100.00%

Table: Last two years sector wise allocation of total loans and advances is depicted below

We can see that, here in 2009 Large and Medium Industries, Small and Cottage Industries, Transportation and Communication Industries sector are allotted more amounts from 2008. On the

other hand, Agricultural Industries, Commerce and Trade Industries, Insurance, Real Estate and Service Industries sector are fewer amounts fixed. In the year 2009 highest amount have been allocated to the Large and Medium Industries.

Particulars 2005 2006 2007 2008 2009

Yield on Loans and Advances (In

Percentage)

12.67% 13.30% 13.15% 13.50% 13.07%

Table: Yield on Loans and Advances for last five years

The table shows that, the yield on loans and advances in 2009 is 13.07% compared to 13.50% in 2008 which shows a decreasing trend. But from 2004 to 2008 there is an increasing tendency in

loans and advances.

Securities/Guarantee:

1) City Solution: – One personal guarantee will required availing City Solution

Eligibility of guarantor:

Any salaried executive deemed acceptable to CBL or Professionals (Doctors, Chartered Accountants, and Engineers etc) deemed acceptable to

CBL or Reputed Businessman deemed acceptable to CBL A guarantor can provide personal guarantee not exiting maximum exposure of the product

ceiling CBL staff cannot give guarantee against City Solution

Required guarantor’s Documents:

Any document showing TIN Photograph and business card

2) City Drive: - One personal guarantee is required from any of the following individuals

Eligibility of guarantor:

Spouse or blood relative (parents, siblings) Any salaried executive deemed acceptable to CBL or

Professionals (Doctors, Chartered Accountants, and Engineers etc) or Reputed Businessman acceptable to CBL

A guarantor can provide personal guarantee not exceeding maximum exposure of the product ceiling and creditability.

CBL staff cannot give guarantee against any retail loan

Required guarantor’s Documents:

Any document showing TIN. In case of spouse and blood relative, TIN will not required

Photograph 3) City Express:-Customer FDR which deposited in this bank, is treated as his/her Securities/Guarantee. In addition, he/she can takes as loan 90% of FDR amount .

4) City Credit Card:-No guarantor is required, only a reference is required.

Identification and Documentation of loan:

City Double Loan-

City Double is a unique loan facility where your fixed deposit in City Bank or in any other financial institution will now allow you to avail two loans at the same time from us – one as overdraft (up to 95% of FD value) and other as an EMI loan (up to Tk. 10 Lacs).

City scholar is a unique education loan offered to fund higher studies not only in Bangladesh but also abroad. It offers up to 95% of you fixed deposit value as student loan or up to tk.10 lac on purely collateral-free basis. Letter of Introduction (LOI) for salaried executives or salary slip, if it covers the major information of LOI

Minimum Income

City Bank fixed deposits City Bank’s deposit scheme of minimum 2 years maturity attained

Wage Earner Development Bond/FDR of other eligible banks and financial institutions Passport/National Identity/Driver’s License/Ward Commissioner’s Certificate with photo

attached

Category Requirement

Salaried executives Minimum Tk. 15,000/- per

month

Self employed professionals like doctors, engineers and

architects

Minimum Tk. 25,000/- per

month

Businessperson, landlord and other-income individuals Minimum Tk. 30,000/- per

month

2 copies photograph of the applicant and 1 copy photograph of the guarantor (if availing unsecured loan portion)

Business card (if any) Bank statement for last 6 months

Any document showing TIN Trade license/Memorandum of Association/ Partnership deed for businessmen Letter of Introduction (LOI) for salaried executives or pay slip if that covers major

information of LOI

Loan handling:

Loan Disbursement Procedure- After the sanction of the loan, the loan is disbursed as follows:

At first branch provides a sanction advice including all terms & conditions asking their opinion.

When the party agreed, send a reply. As per the terms & conditions, the party submits all documents. After collecting the documents, bank submits it to the lawyer for the purpose of registration.

After getting his/her permission, the bank then register the document. At this stage the bank, require a permission mentioning that all necessary activities are

completed. After getting the permission, the party opens an account in the name of loan.

Price Earnings Ratio:

Table: The picture of last 5 years Price Earnings Ratio

PER= (Market) Price per share/Earning per share

By analyzing price earnings ratio we see the bank’s stock valuation and the income the bank is actually generating from each shares. The higher the price earnings ratio becomes, the better the

condition of the company. We see that in 2008 the P/E ratio was 17.82 which decrease in 2009 become 14.00; which mean that in 2009 the company didn’t generate income compared to 2008. But from 2005 to 2008 there is an increasing trend in P/E ratio which shows the better financial

condition of the bank.

Profitability Ratio:

These ratios help us to evaluate the firm’s profits with respect to operating income, assets, or equity. Ratios are —-

v Net Profit Margin

It measures the percentage total operating income, that remains after all the costs and expenses have been paid. It is calculated as follows —

Net Profit Margin = Net Profit after Tax/Total operating Income*100 PARTICULARS/ years 2007 2008 2009

Particulars 2005 2006 2007 2008 2009

Price Earnings Ratio (Times)

10.24

19.31 15.09 17.82

14.00

Net Profit after Tax (mn) 343.46 398.11 818.72

Total operating Income (mn) 2572 3,380 4,368

Net Profit Margin 13.35% 11.78% 18.74%

Table: The picture of last 2 years NPM

The net profit margin indicates that how much the bank keeps in earnings against its sales.

The higher the profit margin indicates a more profitable company that has better control over its costs compared to its competitors. The net profit margin is 18.74% in 2009 in compared to 2008 which was 11.78%. The increasing profit margin shows the better

condition of the bank. Return on Assets (ROA)

It measures the overall effectiveness of management in generating profit with its available assets. It is calculated as follows —-

PARTICULARS / YEARS 2005 2006 2007 2008 2009

Return on Assets

(ROA)(Growth in Percentage) 1.75% .58% .71% .75% 1.23%

Table: The picture of last 5 years Return on Assets (ROA)

ROA = Profit after tax \ Average assets * 100 The higher return on asset shows that the company is well run and has a healthy ROA. Here

from 2006 to 2009 the ROA is gradually increasing which shows that the bank is running well.

Return on Equity (ROE) It measures the return earned by the funds invested by the common stockholders. It is

calculated as follows——-

ROE = Net Profit after Tax/Shareholder’s Equity*100

PARTICULARS/years 2005 2006 2007 2008 2009

Return on Equity (ROE)

(Growth in Percentage)

32.05%

10.69% 12.71% 11.23%

16.24%

Table: The picture of last 5 years Return on Equity (ROE)

The return on equity is an important ratio to decide whether to invest in a company or not. It measures the return on the money the investors have put into the company. Here the ROE in

2009 is 16.24 compared to 2008 11.23%; which shows a good return of the investors money.

Capital Ratio:

This type of ratio analyze a particular Bank’s capital structure and help us to determine the level of assets financed by the Bank’s creditors and the level of assets financed by the firm’s

shareholder’s funds. The common types of ratios are as follows: v Debt Ratios: This ratio analyzes a firm’s debt position, which indicates the amount of other people money

being used in the firm to generate profits by measuring the portion of total asset financed by the firm’s creditor. This ratio is calculated as follows —

Debt Ratio = Total Liabilities or Debt/Total Asset*100

PARTICULARS/YEARS 2007 2008 2009

Total Liabilities 45881.04 52897.099 70602.57

Total Asset 48755.40 57114.58 76466.802

Debt Ratio 94.11% 92.62% 92.33%

Table: The picture of last 3 years DR

The debt ratio measures that how much a bank is dependent on others capital. Lower the

percentage, the less leverage a company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on. In

2009 the debt ratio is 92.33% which shows a risky situation of the bank. v Equity Capital Ratio: The ratio shows the position of the Bank’s owners’ equity by measuring the portion of total

assets financed by the share holders’ invested funds and it is calculated as follows: Equity Capital Ratio = Total Shareholders’ Equity/Total Asset*100

Particulars / years 2005 2006 2007 2008 2009

Equity Capital (mn) 1,958.40 2,530.90 2,874.37 4,217.48 5,864.23

Total Asset (mn) 35,303.74 47,445.75 48,755.40 57,114.58 76,466.80

Equity Capital ratio 5.55% 5.33% 5.89% 7.38% 7.67%

Table: The picture of last 5 years Equity Capital Ratio (ECR)

Operating Efficiency Ratio:

The ratio measures a particular Bank’s operating efficiency, which is the Bank’s ability to serve its customers in the most effective way by using least amount of resources (such as

time, cost etc.). The following ratios are widely used to measure a particular Bank’s operating efficiency:

Operating Cost to Income Ratio:

It measures a particular Bank’s operating efficiency by measuring the percent of the total operating income that the Bank spends to operate its daily activities. It is calculated as

follows: “Operating Cost to Income Ratio = Total Operating Cost/Total Operating Income*100

PARTICULARS/YEARS 2005 2006 2007 2008 2009

Operating Cost (BDT mn) 861.014 1155.457 1316.316 1625.372 2112.244

Total operating Income (BDT mn) 2109.868 2650.154 2572.193 3380.292 4367.88

Operating Cost to Income Ratio 40.81% 43.61% 51.175% 48.10% 48.36%

Table: The picture of last 5 years

SWOT Analysis of The City Bank Limited

Every organization is composed of some internal strengths and weaknesses and has some external opportunities and threats in its whole life cycle. The following will briefly introduce the customers to The City Bank’s internal strengths and weaknesses and ex ternal opportunities and threats as I have

explored that are:

ü “S”- Strengths ü “W”-Weaknesses

ü “O”-Opportunities ü “T”-Threats

Strengths Stable source of fund

Strong Liquidity Position Wide Network of branches

Experienced Top management Diversified Product line Satisfactory IT infrastructure and online banking

Weaknesses Asset infection rate is still high

Relatively high overhead expense Problem in Delivery

Opportunities Regulatory environment favoring Private sector development

Credit card business SME and Agro based industry loan

Threats Deposits as well as quality assert Market pressure for lowering the interest rate

Shrinkage in export, import and guarantee Business due to economic slump and war

Frequent currency devaluation

Market analysis and opportunity for city solution: Major Key players of any purpose unsecured loans are SCB, HSBC, BRAC Bank and Eastern Bank.

They are offering personal loan facility under the following criteria: Category CBL SCB HSBC EASTERN

BANK

BRAC BANK

Loan

Amount

Minimum Tk.

50,000/- and Maximum Tk. 10 lac or 12 times of gross

monthly income, whichever is lower.

Minimum Tk.

50,000/- and Maximum Tk. 10 lac or 10 times

of gross monthly income, whichever is

Minimum Tk.

50,000/- and Maximum Tk. 10 lac or 6 times of

gross monthly income, whichever is

Minimum Tk.

50,000/- and Maximum Tk. 10 lac or 12 times

of gross monthly income, whichever is

Minimum Tk.

50,000/- and Maximum Tk. 10 lac or 12 times

of gross monthly income, whichever is

lower. lower. lower. lower.

Target

Customer

Salaried executives, Professionals like Doctor, Architects,

Engineers, Chartered Accountants,

Consultant, IT professionals and Businessperson

Salaried executives, Self Employed

Professionals and

Businessperson

Salaried executives, Self Employed

Professionals and

Businessperson

Salaried executives, Self Employed

Professionals and

Businessperson

Salaried executives, Self Employed

Professionals and

Businessperson

Rate of

interest

18% 19% -20% 18% 18%-19% 18.5%

Processing

Fee

1% of loan amount 2% 1% 1.5% 1.5%

Table: Market Situation for City Solution

Market analysis and opportunity for city Drive:

Major Key players of Auto loan are SCB, HSBC, BRAC Bank and Eastern Bank. They are offering

the loan facility under the following criteria:

Category CBL SCB HSBC EASTERN BANK BRAC BANK

Loan

Amount

Minimum Tk.

50,000/- and

Maximum Tk. 10 lac

or 12 times of gross

monthly income,

whichever is lower.

Minimum Tk. 2

lac and

Maximum Tk. 20

lac or 10 times of

gross monthly

income,

whichever is

lower.

Minimum Tk. 1

lac and

Maximum Tk. 20

lac or 8 times of

gross monthly

income,

whichever is

lower.

Minimum Tk. 3.5

lac and

Maximum Tk. 20

lac or 15 times of

gross monthly

income,

whichever is

lower.

Minimum Tk. 2

lac and

Maximum Tk. 20

lac or 15 times of

gross monthly

income,

whichever is

lower.

Minimum

Monthly

Income

Minimum BDT

30,000/- per month

Tk 25,000 Tk 20,000 Tk 30,000 Tk 30,000

Target

Customer

Salaried executives,

Professionals like

Doctor, Architects,

Engineers, Chartered

Accountants,

Consultant, IT

professionals and

Businessperson

Self Employed

Professionals,

Businessperson

& Salaried

executives

Self Employed

Professionals,

Businessperson

& Salaried

executives

Self Employed

Professionals,

Businessperson

& Salaried

executives

Self Employed

Professionals,

Businessperson

& Salaried

executives

Rate of

interest

18% 15% to 17% 11% to 16% 14.50% to

16.50%

14% to 18%

Processing

Fee

1% of loan amount 1% 1% 1.5% 1.5%

Personal

Guarantee

Required

Yes, One personal

guarantee is required

Yes No Yes Yes

Table: Industry comparison for City Drive

FINDINGS:

The City Bank Limited has been performing very well. The CBL is running with steady growth in

almost every sphere. They are reducing non-performing loan. They are committed to be a leading Bank in Bangladesh. No doubt, this is the sign of good management. However, the appraisal and proposal system of The City Bank is said to the best one in this kind certain factors are overlooked.

v In appraisal system, the competitive position analysis is not focused while doing the appraisal system v Lengthy lending process

v Lack of documentation v Lack of monitoring of credits

v Shortage of efficient manpower v The product appraisal is done on the customer base not any comparison is done with other product.

v The supplier’s influence is overlooked. v Due to the unavailability the credit demand assessment is not properly done.

City Bank MD & CEO K Mahmood Sattar wins The Asian Banker "Leadership Achievement Award 2010"

Sunday April 18th, 2010, 7pm. Resorts World Convention Center, Singapore. The Leadership Award Gala Dinner, the region’s highest possible award ceremony for

leadership in financial services, is well on its course featuring a black-tie event and all outstanding leaders from the Asia Pacific and Middle East regions. Among the many dignitaries and luminaries in attendance, many of whom are Chairmen and CEOs of

banks and also the global leaders, there can be seen the presence of individuals as notable as Sir George Mathewson, the former chairman of RBS and Mr Neel Kashkari,

the former under-secretary of finance of the United States government and the head of the TARP program during the Bush administration. Then the name of the City Bank’s Managing Director and CEO Mr K Mahmood Sattar reverberates in the hall and he is

called upon the stage to collect two awards: one for City Bank, Bangladesh – the winner of this year’s “The QFC-Asian Banker Strongest Bank in Bangladesh” award;

and the other for himself as the recipient of “The QFC-Asian Banker Leadership Achievement Award for Bangladesh”. He walks up the stairs – with pride and satisfaction over the excellent things this bank has done and produced in last 3 years.

City Bank wins The Asian Banker "Strongest Bank in Bangladesh – 2010" Award

RECOMMENDATION:

Recommendation regarding improvement of Credit management of CBL

v Maintain a high standard credit quality, control & compliance in place.

v Bring down NPL ratio further.

v Basel II guidelines implementation in terms of content & sprit.

v Promote continuous on the job local and overseas training.

v The bank should recalculate its lending rate on a periodic basis to cope up with changing lending

scenario.

v Care should also be taken so that good borrowers are not discarded due to strict adherence to the

lending policy.

v At the branch level, credit department must be adequately capable of collecting the correct and

relevant information and analyzing the financial statements quickly and precisely.

City Bank Chairman Mr Aziz Al Kaiser was present at the event; and he is holding the

“Strongest Bank in Bangladesh” award in the above photograph while Mr Sattar is seen holding his award for “Leadership Achievement”.

v Credit officer must be skilled enough to understand the manipulated and distorted financial

statements.

v Credit committees at all levels must work in co-ordination with each other for quick approval of

loans and to reduce the loan processing cost.

v To expedite the lending process, board credit committee meeting should be held twice a month

instead of once a month.

v To faster the lending process, The City Bank Limited should facilitate online loan application

submission and personal credit processing.

v In case of mortgage, care must be taken to accept collateral on second charge.

v In case of assignment, the bank must ensure that the assignment debtor has given undertaking.

v Monitoring of a loan should be conducted at regular interval.

v Loan monitoring is a continuous task and requires expert work force. Therefore, it is suggested

that The City Bank Ltd should set up a separate loan-monitoring cell, which will be responsible for

monitoring its total loan portfolio with special care to the problem loan.

v There is still much more scope, left to make the credit recovery techniques effective to reduce on

classified loan specifically NPL

CONCLUSION:

Modern Commercial Banking is challenging business. It was revealed from the above presentation that in 2005 Bank has achieved remarkable success in various financial activities as well as in bank’s business. During the year under report, Bank has earned commendable operating profit and

attained capital adequacy. Substantial amount has been recovered from classified loan because of appropriate action in this regard.

For significant performance, the bank has earned National and International recognition. The City

Bank Limited was one of the 12 Bangladeshi Banks among the 500 Banks in Asia for its assets, deposit and profit as evaluated by “Asia weak” in the year 2000. Besides that bank received “Top Ten Company Award” from the Prime Minister of the Peoples Republic of Bangladesh in the year

1992-93 which was declared by Securities and Exchange Commission.

And recently, City bank wins The Asian Banker “Strongest Bank in Bangladesh – 2010” Award. Also City Bank MD & CEO K Mahmood Sattar wins The Asian Banker “Leadership Achievement

Award 2010”.

From the above findings and discussion, we can see that, The City Bank now in good position compared to previous some year. However, the bank can be more improved in its position, if it gives

more concentration in its credit-monitoring sector. The way of this, I already discussed. Such as-Loan monitoring is a continuous task and requires expert work force. Therefore, it is suggested that The City Bank Ltd should set up a separate loan-monitoring cell, which will be responsible for

monitoring its total loan portfolio with special care to the problem loan. Moreover, at the branch level, credit department must be adequately capable of collecting the correct and relevant

information and analyzing the financial statements quickly and precisely. To faster the lending process, The City Bank Limited should facilitate online loan application submission and personal

credit processing. The bank should give importance in general welfare of the economy more than many other financial institutions. The bank should redesign all sorts of banking procedures to be

more user-friendly, attractive and impressive.

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1. R. W. jeffe, (7th Edition). CorporateFinance

2. Reilly / Brown (8th Edition) Investment Analysis And Portfolio Management

3. R.C.Higging. (3rd Edition). Analysis of financial management.

4. Peter S. Rose, S. C. (New Edition). Bank Management & Financial Services.

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6. Brochure of different Accounts of IBBL

7. The City Bank Limited. (website) Retrieved from www.the city bank.com.

8. The City Bank Limited. ( 2007, 2008). Annual Report.

9. The City Bank Limited. Bangladesh Bank Guidelines & Internal Circulars of the City Bank

Ltd.

10. The City Bank Ltd. Departmental Operation Instruction & Concept File of Corporate

Finance.

11. Different types of tranning material about credit by CBL

12. "SWOT Analysis for Management Consulting" . SRI Alumni Newsletter

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Alumni Newsletter (SRI International).

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