Professional Documents
Culture Documents
AI-Arafah Islam! Bank Ltd that is the private Commercial Bank in Bangladesh that came in existence
on 18 June 1995. With TK.1000.00 million authorized capital and TK.677,94 million paid up
capital. This report 'is made on the title of "Performance Evaluation of Al- Arafah Islami Bank
Ltd. The objective of the report is to analyze its financial performance, growth of the bank,
measure its foreign exchange business and comparing it with the leading islami bank of Bangladesh,
Islami Bank Bangladesh limited. For this purpose data and information have collected by direct
conversation with the officer and client of the bank and study the annual report, various
books and articles during the period of 2008-2012. The bank had a very rapid growth over
hose years. And I have put findings and recommendation by analyzing the ratio, import,
export, remittance and by comparing these performances with IBBL In 2008 AIBL had its
authorized capital 2500 million and paid up capital Tk.1,383.81 million which was in 2012
Tk.10,000 million and 7,130.98 million. It makes 300% growth in authorized capital and
415.31% growth in paid up capital over the five years. In 2012 AIBL achieve growth in
its deposits 44.41% and in investment 37.23%. The current ratio and debt ratio was also in an
increasing trend from 2010-2012 but the ROA, ROE and EPS was decreasing. Which
highlights that, the bank couldn't able to acquire required return from its assets. The profit
before tax and provision and profit after tax of the bank had increased in 2012, 9.91%
and 11.52% respectively. In the foreign exchange sector AlBL's performance is also
impressive. At present AIBL has 100 Branches throughout the county out of which 21
Branches are authorized to deal in Foreign Exchange Business. AIBL has 28 Nostro
Accounts 281 Relationship Management Application (RMA) with different renowned
Foreign Banks/Foreign Correspondents in 49 countries across the world. At the end of 2012
the total foreign Exchange Portfolio (Import, Export and Remittances) was Tk. 1,53,528.70
million showing a growth of 13.56% of this bank in compare with the corresponding year.
The total export of the bank was Tk. 52,202.10 million in 2011 which was increased by
12.02% to Tk. 58,476.60 million in 2012. Similarly, the amount of import has decreased from
Tk. 76,113.10 million in 2011 to Tk. 71,931.70 million in 2012 a negative growth of
5.49%. The Inward Foreign Remittances Business of the Bank recorded a tremendous
growth rate of 236.04% from Tk. 6,876.20 million to Tk. 23,120.40 million in compare
with last year due to starting live dealing by Treasury and delivery of quality services to the
clients. In the comparison of foreign exchange performance, with Islami Bank Bangladesh
ltd. (IBBL), we have seen the growth rate of AIBL is better than IBBL. In 2008 IBBL total
Foreign exchange were Tk.402669 Billion, in 2012 it became Tk.492834 million. The growth
rate over the five years is 22.39% *here the growth of AIBL over the same period is
176.46%. IBBL has a downward flow in export and import in 2011-2012 where AIBL kept
its upward stream in this period. Though growth is very high, still AIBL couldn't touch the
range of IBBL. So they have to enhance their competitive strengths and skill in banking
business.
Table of Contents
Title
Page
Chapter One
Introduction
1.1 Background of the Study:
E-a-x and financial institution play an important role in financial inter mediation and
thereby contribute to the overall growth in the economy. At present the financial system in
Bangladesh consists of the central bank, nationalized commercial/specialized banks, private
banks, foreign banks and other non-bank financial institution. This report is based on one
commercial Bank mat is the Al-Arafah Islami Bank Ltd.
1.4 Methodology:
Is report is based on exploratory recharge. Because, to make Ratio analysis, Comparative
analysis and Findings I required to investigate on general banking and foreign exchange
department. In order to make the report more meaningful and presentable two sources of
data arc information have been used widely:
Primary sources:
The primary sources which are as follows Face-to-face conversation with the Executives and
officers of Bank..
1. Informal conversation with the client.
2. Practical work exposures from the different desks of the various departments of the
Branch covered.
Secondary Sources:
The Secondary Sources of data and information are:
1. Annual Report of AI-Arafah Islami Bank Ltd.
2. Periodicals published by Bangladesh Bank.
3. Various books, articles, compilations etc. Regarding general banking functions.
Relevant file study as provided by the officer's concerned.
Chapter Two
Conceptual Issues
2.1 Historical Background of Al-Arafah Islam Bank Limited:
AI-Arafah Islam! Bank Ltd was established in 1995 under the companies Act, 1994 as a
banking Company with limited Liability by shares. It is an interest-free Shariah bank of
Bangladesh rendering all types of commercial banking service under the regulation of Bank
Companies Act, 1991. The Bank conducts its business on the principles of Musaraka, BaiMurabaha, Bai-muazzal and Fire Purchase transactions approved by Bangladesh Bank.
Naturally its modes and operations are substantially different from those of other
conventional commercial banks. There is a Shariah Council in the bank who maintains
constant vigilance to ensure that the activities of the bank are being conducted on the
precepts of Islam. The Shariah Council consists of prominent Ulema, reputed Bankers,
renowned Lawyers and eminent Economist.
2.2 Vision:
To be a pioneer in islami banking in Bangladesh and contribute significantly to the
growth of the national economy.
2.3 Mission:
Balanced growth.
ensuring
balanced
socio
economic
Chapter Three
Performance Analysis of Al-Arafah Islami Bank Limited
3.1 Key Financial Data & Key Rations-AIBL:
2011
2012
2013
2014
2015
Growth %
Authorize Capital
2650
2650
6000
6000
6000
Paid up Capital
1228
1289
1547
1934
2128
10
988
1262
1578
2065
2838
37
2216
2551
3125
4000
4966
24
28439
41554
48731
56986
60918
23372
34049
39972
49698
52910
Investments
3926
5378
5972
7239
8660
20
Fixed Assets
122
217
291
387
424
10
33072
47594
57443
71137
77767
Import Business
30213
46277
49496
65737
46160
(30)
Export Business
13505
23268
31081
39038
33305
(15)
Guarantee Business
6099
6473
6523
7887
6462
(18)
3377
16764
10609
11834
9786
(17)
2216
2551
3126
3964
4634
17
Supplementary Capital(Tier 2)
237
373
554
844
1000
18
Interest Income
2897
4342
5636
7171
7466
Interest Expense
2149
3380
4049
5214
5407
748
962
1587
1958
2060
739
1110
1582
1929
2175
13
594
889
1159
1353
1424
145
221
423
576
751
30
893
1183
2010
2533
2810
11
125
233
479
669
675
305
370
827
1025
1176
15
463
580
704
839
959
14
9.94
8.23
8.80
9.77
9.30
(5)
1.06
1.2
1.56
2.08
2.01
(3)
2453
2924
3680
4808
5634
17
11.00
9.43
10.36
11.84
11.31
(4)
Balance Sheet
Capital Measures
Income Statement
3.43
3.77
4.54
4.60
4.56
(1)
82.18
81.94
82.03
87.21
86.85
(0)
1.33
1.24
1.38
1.28
2.10
64
20.89
22.74
22.53
20.97
19.32
(8)
1.40
1.22
1.23
1.18
1.29
8.13
9.15
8.97
9.40
8.68
(8)
75.44
78.14
72.15
72.16
70.85
(2)
Number of Branches
29
37
41
45
50
11
20
100
688
786
842
898
924
3,677
4,187
5,340
8,198
10,530
28
406
350
350
350
350
351
554
1258
1908
2946
54
1.51
1.64
3.15
3.84
5.57
45
236
372
465
620
625
103
172
439
825
1488
80
12.28
12.89
15.47
19.34
21.28
10
43.99
45.00
46.06
39.42
45.09
180
198
202
207
233
13
469
466
706
361
484
34
10.66
10.32
15.33
9.15
10.72
29
2.60
2.35
3.49
1.74
2.07
19
20
10
15
1:20
1:5
1:4
1:1
1:4
Other Information
Number of Employees
Number of Shareholders
Number of Foreign
Correspondents/Banks
Credit Quality
Share Information
2011
Net Working
-30095138
2012
2013
2014
2015
Capital
9897695572
3667130639
-30095138
2011
856254823
2012
2013
2014
52481367
2015
Interpretation: From the above graphical representation we can observed that the trend of
working capital was very much unfavorable in 2010. But it had an increasing trend to 2012. It
increases almost 170% from 2011 to 2015.
10
Current Ratio
It is the best known liquidity measure of business firm. Current ratio indicates the ability of
business firm to meet its short term financial obligations. This ratio is determined as follows:
Year
Current ratio
2011
0.08
2012
0.10
2013
0.12
2014
0.11
2015
0.14
0.14
0.11
0.12
0.1
0.08
2011
2012
2013
2014
2015
Interpretation:
From the above graphical representation we can see that the trend of current ratio was
increasing from the year of 2010 to 2015 but the ratio is not showing a good sign of the bank. It
is showing the bank has very poor amount of liquidity to meet its short term financial
obligations. So, AIBL should take necessary steps to overcome the liquidity problem as
soon as possible.
11
2011
0.90
2012
0.91
2013
0.92
2014
0.90
2015
0.91
0.91
0.9
0.92
0.91
0.9
2011
2012
2013
2014
2015
Interpretation:
The above figure was shown that AIBL is maintaining a wealthy debt ratio all the three
years. The ratio of 2010 was 0.90, 2011 was 0.91 and 2012 was 0.92 which shows their
good manage over the debt financing. It proves that AIBL has good market image with
stable leverage ratio. But the debt financing of AIBL is very high.
12
2011
2.22
2012
5.55
2011
24%
2012
2013
5.88
2013
2014
2014
5.67
2015
6.00
2015
9%
22%
22%
23%
Interpretation
The net profit margin of AIBL in 2010,2011 & 2012 were 2.22%, 5.55% & 5.88% respectively.
So it is increasing continuously but the growth of 2011 is much better than 2015.
13
2011
ROE (%)
24.70
24.7
2011
24.1
2012
2012
2013
24.10
20.01
20.01
18.34
2013
2014
2014
18.34
2015
13.51
13.51
2015
Interpretation:
Here, we can find that AIBL had a good enough ROE of 20.01% in the year 2010, but it was
continuously decreasing up to 2012, which is not a good sign for AIBL. It has got 26.31%
negative growth in this year. As the proposed net income was decreased more than dividend
and paid up capital. So the return on equity ratio of AIBL is not well.
14
Return on Assets
Return on asset measures the overall effectiveness in generating profits with available assets;
earning power of invested fund. This ratio is used frequently for assessing the performance of
fund. So it is important to evaluate how assets are contribution to generate profit. It has been
calculated in the following way:
Year
2011
ROA (%)
2012
1.80
2013
1.77
2015
14%
2.65
2014
2.06
2015
1.30
2011
19%
2014
21%
2012
18%
2013
28%
Interpretation
From the above chart we can arrive at a conclusion that the ROA scenario of AIBL shows a
consistent fall from 2011 to 2012. 2013 & 2014 was almost constant but in 2010 it grows its
percentage unexpectedly. The ROA figure shows an increasing trend since its inception. AIBL
has lowest ROA in the year 2014 because increases its interest expenditures and other costs and
disable to control over the outflow but at the year 2015 ROA improved because of efficient
asset utilization of cash.
15
2011
2012
3.72
2013
2.00
2014
4.14
3.73
2015
2.38
EPS
4.14
3.72
2.38
2011
2012
EPS
3.73
2013
2014
2015
Interpretation
From the above graph, we can conclude AIBL had lowest EPS in 2009, than it increases
dramatically in 2010. But after that it is decreasing constantly. This is very undesirable &
unfortunate that AlBL's EPS obtain 14.70% reduction in 2015..
16
Strength
Weaknesses
Strong
employee
Absence
bonding
of
strong
marketing
activities
trained workforce
High
cost
for
maintaining
an
Account
and
belongings
Low modernized
Investment sector is very well They cannot open sufficient number of L/C
position
Efficient performance
17
Threats
Opportunity
foreign
Opportunity
Al
of
Diversified Arafahlslami
product line.
Bank
Ltd
because
the
*High finding cost for lending is great countries is dependable each other. So, if
opportunity for the bank. Due to lack of the monetary flow faces any obstacle it.
poor performance of NCB's in our country
though they are grabbing an huge deposits hampers the running of full chains. As a
from the market, PCB's are fulfilling the result
high demand of the financial marketing recovery face a great threat for commercial
lending money towards deficit sources in
are
institutions
not
rather
mere
profit
they
have
earning
great
Upcoming banking
Lack
of
Foreign
department
Political situation.
Remittance
19
Chapter Four
Findings
4.1 Findings
> We have observed that the net working capital (170%), deposit (44.41%) & investment
(37.23%) have increased but the return on asset (36.89%), return on equity (26.34%) &
earning per share (36.19%) have decreased from 2011-2015. That means the company
enhancing its area of business & operation but foiling to achieve required return from its
investment.
> Current ratio and Debt ratio both have increasing trend but these are not in good
proportion. They have very little amount of current asset to meet up their current
liabilities, the ratio from 2011-2015 were 0.08, 0.10 and 0.12 respectively. And though
they have enough assets to meet up their debts, but their debt financing is very high.
From 2010-2012 the ratio were 0.90, 0.91 and 0.92.
> AIBL has an increasing trend in its import and export from 2011-2015. But in 2012 AIBL
has increased its export and decreased its import business. It has imported 5.49% lesser
in 2015 than 2011 where Export is 12.02% higher in 2012 the
> Remittance of AIBL had a steady growth from 2008 -2011, which is around 56%. But in
the period of 2011-2012 it grew 236.24%. Because at that period the number of NRB
account is increased in a good rate. It helps the bank to enhance its remittance
transaction very tremendously at the end of 2011 than 2015.
> Al-Arafah Island Bank Ltd operates foreign business through 21 branches that are not
sufficient to competition in the market.
> After analyzing the performance of AIBL and IBBL from the year 2008-2012, we found
AIBL had 4.25%, 64.15%, 36.09% and (5.49%) and IBBL had (4.22%), 52.75%, 22.30%
and (48.16%) growth respectively. That mean from 2009-2011 both banks increased its
import but in 2012 it reversed in very high range.
> In case of export AIBL has a better trend than IBBL. From 2009-2012 AIBL had 16.70%,
36.08%, 62.91% and 12.02% where IBBL had (4.22%), 52.75%, 22.30%, (48.16%).
20
Chapter Five
Recommendations & Conclusion
5.1 Recommendations
It is clear that the AI-Arafah Islami Bank Ltd. Foreign Exchange Branch has ensured
productive utilization. The branch success has been made possible due to dynamic
leadership of the Branch Management, proper guidelines, good counsel and devotion
and sincerity of all categories of officers and the employees of the Branch. My
recommendations of foreign business related are given bellow:
1. AIBL should enhance their current asset to meet up their current liabilities and decrease
their debt from the market.
2. AIBL should be more concern about utilization of their asset and confirm required
return
from their investment by more observation and analysis. They can employ skilled
investment specialists to increase their profit.
3. The number of exporter and importer who operate through this bank is not enough to
achieve the banks goal. So AIBL should offer more facilities to attract them to be their
client.
4. They should increase their branches & Maintain foreign exchange department in more
branches. Then it will more flexible for their clients to deal internationally.
5. Foreign exchange department should be fully computerized that the exchange process
would be convenient for both the bankers and the clients
6. Though AIBL has better growth trend than IBBL, sill it is not same in amount. IBBL has
a strong goodwill and long run position in market.
advertisement, make an easier and faster procedure for their clients and increase their
investment in foreign exchange business.
7. Banking is a service-oriented marketing. Its business profit depends on its service quality.
That's why the authority should always be aware about their service quality.
8. They should establish more ATM booth and on-line facilities for their customers.
21
5.2 Conclusion
Success in the banking business largely depends on managing its assets, liabilities, capital and
effective lending and Advance foreign exchange facilities. Less the amount of loan losses, the
more the income will be from Credit operations. Beside this successful foreign exchange
activities can provide more profit to the Bank and also create a positive image of the country in
the international trade. Though there are some limitations in the foreign exchange department
of al-arafah islami bank, but it is accepted that AI-Arafah Islami Bank is growing day by day.
So, if the AI-Arafah Islami Bank Ltd. takes some action regarding my recommendation stated in
this report, bank may improve its position in the long run.
22
References
Books:
Kothari, C. R.; Research Methodology Methods & Techniques, Second Edition, McGraw Hill Com. Inc.; New York, USA, 2005.
Khan, M.Y. & Jain, P.K, Financial Management, 3rd Edition, Tata McGraw-Hill
Publishing Co. Ltd., New Delhi, 1999.
Reports:
Annual Report of AI-Arafah Islami Bank Ltd, 2015
Annual Report of Islami Bank Bangladesh Ltd, 2014
Prospectus of AI-Arafah Islami Bank Ltd, 2013
Service Rule of AI-Arafah Islami Bank Ltd, 2012
Internet
www.aibl.com.bd
www.wikipedia.com
www.banglapedia.com
23