Financial Performnce of Camel Ratio Analysis of JBL 31 PDF

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INTERNSHIP REPORT ON ANALYSIS OF FINANCIAL PERFORMANCE OF JANATA BANK LIMITED THROUGH CAMELS RATING RATIOSSupervised By Md. Sayeem - Bin - Hafiz Assistant Professor Department of Finance Bangladesh University of Business and Technology (BUBT)Submitted By Md. Rakibul Hasan Khan Rizvi Id: 17181101016 ...

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INTERNSHIP REPORT ON ANALYSIS OF FINANCIAL PERFORMANCE OF JANATA BANK LIMITED THROUGH CAMELS RATING RATIOS

Supervised By Md. Sayeem - Bin - Hafiz Assistant Professor Department of Finance Bangladesh University of Business and Technology (BUBT)

Submitted By Md. Rakibul Hasan Khan Rizvi Id: 17181101016 Program: BBA Intake: 44th Department: Finance Bangladesh University of Business and Technology (BUBT)

Bangladesh University of Business and Technology (BUBT)

Submission Date: December 19, 2021

LETTER OF TRANSMITTAL

December 19, 2021 Md. Sayeem - Bin - Hafiz Assistant Professor Department of Finance Bangladesh University of Business and Technology (BUBT) Subject: Submission of Internship Report on “Analysis of Financial Performance of Janata Bank Limited through CAMELS Rating Ratios” Dear Sir, I am glad to let you know that I would like to submit my internship report titled “Analysis of Financial Performance of Janata Bank Limited through CAMELS Rating Ratios.” This report is the partial fulfillment of BBA program, for the completion of the BBA program. I have tried my best to submit a good report with as much information as I could gather during the short time span allotted for writing the report. I made sincere efforts to study related materials, documents, observe operations performed in Janata Bank Limited and examine relevant records for preparation of the report. Therefore, I hope that you would be kind enough to accept my Internship Report &oblige me thereby.

Yours Sincerely,

…………………………… Md. Rakibul Hasan Khan Rizvi ID: 17181101016 Program: BBA Intake: 44th Department of Finance Bangladesh University of Business and Technology (BUBT)

STUDENT’S DECLARATION

This is to notify that the work presented in this report has been carried out by me and has not been previously submitted to any other University/Organization for an academic qualification or degree. The work I have presented does not breach any existing copyright and no portion of this report is copied from any work done earlier for a degree or otherwise.

…………………………… Md.Rakibul Hasan Khan Rizvi ID: 17181101016 Program: BBA Intake: 44th Department of Finance Bangladesh University of Business and Technology (BUBT)

SUPERVISOR’S CERTIFICATION

This is to certify that the report on “Analysis of Financial Performance of Janata Bank Limited through CAMELS Rating Ratios”. is the bona fide record and the report is done by Md. Rakibul Hasan Khan Rizvi as a partial fulfillment of Bachelor Business Administration (BBA) degree from Bangladesh University of Business and Technology (BUBT). The report has been prepared under my guidance and is a record of the authentic work carried out successfully.

……………………………….. Md. Sayeem - Bin - Hafiz Assistant Professor Department of Finance Bangladesh University of Business and Technology

ACKNOWLEDGEMENT At the very beginning, I would like to express my deepest gratitude to Almighty Allah for giving me the strength and the composure to finish the task within the schedule time. I am deeply indebted to Ms. Hosnera Khatun, Senior Principle Officer of Janata Bank Ltd (Mirpur 1 Branch) for providing me lot of support to start my Internship. And I want to give a lot of thanks to him for his help and support. Finally, I want to give my special thanks to my supervisor and also want to express my sincere gratitude to my supervisor Md. Sayeem - Bin - Hafiz, Assistant Professor, Department of Finance, Bangladesh University of Business and Technology (BUBT), for his whole-hearted supervision to my work during the internship period. My deep gratitude goes to him for reviewing the whole report so carefully and expertly and forgiving me valuable advices and suggestions to complete the whole things in a right manner. Her suggestions and comments to make the report a good one was really a great source of spirit for me.

EXECUTIVE SUMMARY Janata Bank limited one of the renowned commercial bank running its operation since 2007.The bank has already gained people faith and trust for its satisfactory service and good financial performance through strong leadership skills. The study focuses on the financial performance of JBL through camel ratings ratios including analyzing capital adequacy, evaluation of asset quality, management soundness, profitability ratios, evaluation of liquidity etc. The data of the study are collected for the period of five years from 2016-2020. The study reveals that Capital adequacy position of JBL complied with capital adequacy requirements of regulatory authority. However, tier-1 capital to risk weighted assets ratio was decreased over the year. Classified loan ratio of Janata Bank Ltd. was increased from 14.73% in 2016 to 33.72% in 2018, but after that it was decreased to 22.69% in 2020. It refers that the bank management become efficient in recovering its bad debts from customers, however the ratio is quite alarming for the bank sustainability. The bank management was not efficient enough to reduce its cost relative to its income. Profitability position of JBL was fluctuated and decreased over the year. However the management was not efficient enough in generating profit by using its asset & equity. The bank maintained adequate amount of liquidity to support its operation. However the bank management becomes efficient in converting its deposit into credit. The amount of rate sensitive asset of Janata Bank Limited was increased over the year which indicates the market risk sensitivity is well not controlled by the bank management. JBL should improve risk weighted assets and other risk profile though bank’s capital level exceeds minimum requirements. JBL should monitor, identify and manage problem assets on regular basis and take necessary measures to solve the weakness if any. JBL should identify various profitable investment opportunities with minimum risk to increase overall earning scenario. When capital needs to be increased, earnings also need to be increased by proper use of capital to generate income for bank. JBL should increase & improve deposit to get more liquid fund or withdraw its investment to minimize its liquidity risk. Bank should invest more in current or short term assets to maintain a balanced liquidity position. JBL’s sensitivity to market risk is not well controlled so the bank should increase its investment in securities especially in government bond as risk free instrument.

TABLE OF CONTENTS Particulars Chapter 1: Introduction 1.1 Background of The Report 1.2 Origin of The Report 1.3 Scope of The Study 1.4 Objective of The Study 1.5 Methodology of The Report 1.6 Limitations of Study

Page No.

10 10 10 11 11 12

Chapter 2: Organizational Overview 2.1 History of Janata Bank Ltd 2.2 Mission of Janata Bank Ltd 2.3 Vision of Janata Bank Ltd 2.4 Value of Janata Bank Ltd 2.5 Objectives of Janata Bank Ltd 2.6 Functions of Janata Bank Ltd 2.7 Corporate Profile of Janata Bank Ltd 2.8 Management Hierarchy of Janata Bank Ltd 2.9 Product & Service of Janata Bank Ltd

14 14-15 15 15 15 16 16 16-17 17-18

Chapter 3: Theoretical Aspect 3.1 Origin of Camel Rating System 3.2 Camel Rating Framework 3.3 Following is a Description of the Graduation of Rating 3.4 Camels Composite Rating System 3.5 Limitation of a Camel Rating 3.6 Camel Rating System of Bangladesh

20 20-21 22 22 23 24

Chapter 4: Analysis of Financial Performance 4.1 Analyzing Capital Adequacy Capital Adequacy Ratio Tier 1 Capital to RWA Ratio 4.2 Evaluation of Asset Quality Classified Loan Ratio Actual Provision to required Provision 4.3 Management Soundness Cost to income Ratio Earning Per Employee Expense Per Employee 4.4 Profitability Ratio Return on Assets Return on Equity Net Interest Margin 4.5 Evaluation of Liquidity Credit to Deposit Ratio

26 26 27 28 28 29 30 30 31 32 33 33 34 35 36 36

Excess Liquidity 4.6 Evaluation of Liquidity Security to Asset Ratio Capital Charge for Market Risk Ratio

37 38 38 39

Chapter 5: Findings, Recommendations and Conclusion 5.1 Findings 5.2 Recommendations 5.3 Conclusion

41 42 43

Bibliography Appendix .

44 45-51

Chapter – 1 Introduction

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1.1 BACKGROUND OF THE REPORT Internship program is an essential and mandatory part for graduation program in the discipline of Bachelors of Business Administration (BBA).The internship is the final of the program gives the way to practice what we have learnt. It enables student to apply their conceptual knowledge in the practical. The report has been prepared in a partial fulfillment of the requirement for the degree of Bachelors in Business Administration (BBA) at Bangladesh University of Business & Technology, one of the leading institutions of Bangladesh. The present report has been prepared on the basis of experience obtained throughout the internship period. Primary source of this report preparation is the observation and personal experience in course of the involvement in the banking activities of Janata Bank Limited, as an intern. The major part of this internship was spent in the Analysis of Financial Performance of Janata Bank Limited through CAMELS rating.

1.2 SIGNIFICANCE OF THE REPORT As a mandatory requirement of the Bachelor of Business Administration (BBA) program, I was assigned to do my internship in Janata Bank Limited period of three months. This is because knowledge and learning become perfect when it is associated with theory & practice. By this internship program student can establish contacts networking. This report “Analysis of Financial Performance of Janata Bank Limited through CAMELS rating ratios’ has been prepared to fulfill the partial requirement of BBA program as a mean of internship program.

1.3 SCOPE OF THE REPORT The report is mainly combined to the Financial Performance Evaluation of Janata Bank Limited through CAMELS rating ratios. In order to conduct this study on this main issue, the following aspects come with in the span of the study.  An overview of Janata Bank Limited.  Analysis of financial performance of Janata Bank Limited through CAMELS rating.

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1.4 OBJECTIVE OF THE REPORT 1.4.1 Broad objective The broad objective of this report is to analyze the financial performance of Janata Bank Limited through CAMELS rating ratios.

1.4.2 Specific objectives •

To assess the capital adequacy position of Janata Bank Ltd.

•

To analyze the asset quality of Janata Bank Ltd.

•

To evaluate the management soundness of Janata Bank Ltd.

•

To analyze the earning & profitability of Janata Bank Ltd.

•

To assess the liquidity position of Janata Bank Ltd.

•

To analyze the sensitivity to market risk of Janata Bank Ltd.

1.5 METHODOLOGY OF THE STUDY 1.5.1 Research Design The study, financial performance of Janata Bank Limited, is descriptive in nature that has been conducted mainly using secondary data. The study focuses on financial performance of Janata Bank Limited through CAMELS rating ratios.

1.5.2 Data used in the study In order to prepare the report secondary data are mainly used. The secondary data is collected from the annual report of Janata Bank Limited, annual report of Bangladesh Bank, website & book. The data are collected for the period of 5 years from 2016 to 2020. The use of primary data is very limited in the report. 1.5.3 Data Analyzing and Reporting The study, Evaluation of financial performance of Janata Bank Limited through CAMELS rating, is conducted using ratio analysis. This has been conducted in the form of trend analysis. Computer software, Microsoft word, Microsoft Excel is also used for analyzing and reporting purpose of collection data.

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1.6 LIMITATION OF THE REPORT To prepare a report on the achieved practical on the achieved practical experience in a short duration it does not an easy task. In preparing this report, some problems and limitations have encountered which are summarized below: •

Time and Cost Limitation: Due to time and cost constraint the study is concentrated in selected areas. To continuing with such a vast area requires a big deal of time and cost.

•

Difficulty to Collected Data: Generally Bank is not willing to provide their actual data of financial statement.

•

Lack of Secondary Information: The secondary source of information was not enough to complete the report.

•

Lack of Co-operation: As the Bank’s officials are so much busy that sometimes it become difficult for them to co-operation with me, which is also a constraint for this report.

•

Lack of Experience: Finally, the lack of depth of experience and the analytical capacity of my writing such report is also a short coming of this study.

•

Difficulty to Adjust with a New Environment: Actually adjusting with the new environment is difficult for every human being. A sudden change of studentship to internship like a job is a problem.

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Chapter - 2 Organizational Profile

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2.1 PROFILE OF JANATA BANK LIMITED Janata Bank Limited, one of the state owned commercial banks in Bangladesh, has an authorized capital of Tk. 800 crore (approx. US$ 116.79 million), paid up capital of Tk. 259.39 crore (approx. US$ 37.87 million) and reserve of Tk.292.67 crore (approx. US$ 42.73 million). The Bank has a total asset of Tk. 24406.11 crore (approx. US$ 3562.94 million) as on 31st December 2008. Immediately after the emergence of Bangladesh in 1971, the erstwhile United Bank Limited and Union Bank Limited were nationalized and renamed as Janata Bank Limited. Janata Bank Limited operates through 848 branches including 4 overseas branches at United Arab Emirates. It is linked with 1198 foreign correspondents all over the world. The Bank employs more than 13(Thirteen) thousand persons. The mission of the bank is to actively participate in the socio- economic development

of

the

nation

by

operating

a

commercially

sound

banking

organization, providing credit to viable borrowers, efficiently delivered and competitively priced, simultaneously protecting depositors’ funds and providing a satisfactory return on equity to the owners. The Board of Directors is composed of 11 (eleven) members headed by a Chairman. The Directors are representatives from both public and private sectors. The Bank is headed by the Chief Executive Officer & Managing Director, who is a reputed banker. The corporate head office is located at Dhaka with 35 (thirty five) Divisions.

2.2 VISION To become an effective and the largest commercial bank in Bangladesh to support socioeconomic development of the country and to be a leading bank in South Asia.

2.3 MISSION Janata Bank Limited will be an effective commercial bank by maintaining a stable growth strategy, delivering high quality financial products, providing excellent customer service through an experienced management team and ensuring good corporate governance in every unit/component of banking network

2.4 VALUE OF JANATA BANK LIMITED  To Creating an honest, open and enabling environment.  To have a strong customer focus and relationships based on integrity, superior service and mutual benefit. Page | 6

 To strive for profit & sound growth.  To Work as a team to serve the best interest of their owners.  To Relentless in pursuit of business innovation and improvement.  To Value and respect people and make decisions based on merit.  To Base recognition and reward on performance.  To Responsible, trustworthy and law-abiding in all that they do. 2.5 OBJECTIVES OF JANATA BANK LIMITED The objectives for which the bank is established are as follows 

To carry on, transact, undertake and conduct the business of banking in all branches.



To receive, borrow or to raise money on deposit, loan or otherwise upon such terms as the company may approve.



To carry on the business of discounting and dealing in exchange of specie and securities and all kinds of mercantile banking.



To provide for safe-deposit vaults and the safe custody of valuables of all kinds.



To carry on business as financiers, promoters, capitalists, financial and monitory agents, concessionaires and brokers.



To act as agents for sale and purchase of any stock, shares or securities or for any other momentary or mercantile transaction.



To establish and open offices and branches to carry on all or any of the business abroad and within the country provided prior permission is obtained from Bangladesh bank.



To ensure optimum utilization of all available resources.



To remain one of the best banks in Bangladesh in terms of profitability and asset quality

. 2.6 FUNCTIONS OF JANATA BANK LIMITED Janata Bank provides complete range of services to its customers both domestic and foreign. Rendering of General Banking Facilities & Utility Services, Deposit Mobilization, providing various Credit Facilities including Working Capital to Industries, Investment, Outward & Inward Remittances, Financing Import & Export etc. are the major functions performed by Janata Bank. In order to provide better services to its Customers and Correspondents Janata Bank is now more organized to handle Page | 7

sophisticated operations through a well-trained and efficient Manpower. Recently Janata Bank has entered into computer operations to provide prompt and efficient services to the Customers. Janata Bank has been involved in Micro financing since 1973 through its vast branch network spread all over the country. Bank has launched these micro credit programs/projects on its own initiative and also in collaboration with local and foreign agencies.

2.7 CORPORATE PROFILE OF JANATA BANK LIMITED Name of the Bank Chairman CEO & Managing Director Bank Secretary Legal Status Date of Incorporation Head Office Authorized Capital Paid-up Capital Number of Employee Number of Branches Phone-PABX FAX SWIFT Website Email

Janata Bank Limited Dr. S. M. Mahfuzur Rahman Md. Abdus Salam Azad FF Mr. Md. Abdul Majid Public Limited Company 21 May, 2007 Janata Bhaban 110, Motijheel C/A Dhaka-1000 Bangladesh. Tk. 30,000 million Tk.23,140 million 11,483 916 +880-9566020, 88-02-9564644, 9560869 JANBBDDH www. janatabank-bd.com, jb.com.bd [email protected]

2.8 MANAGEMENT HIERARCHY OF JANATA BANK LIMITED

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CEO & Managing Director Deputy Managing Director General Manager Deputy General Manager

Organization Organogram

Assistant General Manager First Assistant General Manager Senior Executive Officer Executive Officer

Assistant Executive Officer Assistant Officer Grade-1, 2 Support Staff -1, 2

2.9 PRODUCTS & SERVICE OF JANATA BANK LIMITED  Deposit Products:  Current Deposit Account v Short Term Deposit  Savings Bank Deposit Account v Fixed Deposit  Foreign Currency Deposit v Monthly Savings Scheme  Monthly Profit Based Savings Scheme  Janata Bank Savings Pension Scheme (JBSPS)  Janata Bank Deposit Scheme (JBDS)  Medical Deposit Scheme (MDS)  Janata Bank Monthly Savings Scheme (JBMSS)  Janata Bank Special Deposit Scheme (JBSDS)  Janata Bank School Banking Savings Karjakram Page | 9

 Retirement Savings Scheme (RSS)  Janata Bank Limited Retirement Savings Scheme ( JBLRSS)  Janata Bank Masik Amanat Prakalpa (JBMAP)  Janata Bank Double Benef...