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Together Towards Tomorrow

1.01 INTRODUCTION

The prosperity of a country depends upon its economic activities and banking sector plays a vital

role here. So banking as a profession has achieved huge popularity all over the world. The same

concern immensely appeals me as well. By the grace of Almighty Allah I have been assigned to

prepare an internship paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

- a very promising third generation bank of Bangladesh. I went through various functions and

activities of the bank with an analytical point of view during the last few months and witnessed

the dynamicity of their style. This inspired and helped me a lot to furnish my internship report

with a great deal of enthusiasm.

I believe that I have tried all the way to follow the previous studies retaining my originality in

writing the report. Any analytical criticism and creative suggestion on this concern will receive

my heartiest welcome.

1.02 ORIGIN OF THE REPORT

Each professional degree needs practical knowledge of the respective field of discipline to be

fruitful. Our BBA program also has an internship program, relating to the exchange of theoretical

knowledge into the real life practical situation. The report entitled Performance Evaluation of

Export Import Bank of Bangladesh Limited originated from the partial fulfillment of the

internship program. The main purpose of the preparation of the report is due to the partial

fulfillment of the internship program period of the BBA Program conducted by the school of

Management and Business Administration, Shahjalal University of Science and Technology,

Sylhet, Bangladesh.

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

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During the internship program, I was under the supervision and guidance of Fazle Elahi

Mohammed Faisal, Lecturer, Department of Business Administration, Shahjalal University of

Science and Technology, Sylhet, Bangladesh.

1.03 OBJECTIVES

The General objective of the study is to provide an overview of learning of the intern during the

internship program and fulfill the internship requirement. Beside the general objective, the report

can be categorized into main objective and specific objectives. The objectives behind this report

are mentioned below:

(i) Main Objective:

The main objective of this study is to prepare an internship paper (which is a partial requirement

of the under graduation program) on the specified topic working within an organization

implementing the knowledge that have been gathered over the past few years at Shahjalal

University of Science and Technology, Sylhet, Bangladesh.

(ii) Specific Objectives:

The specific objectives of this report are as follows:

To analyze the performance of Export Import Bank of Bangladesh Limited (EXIM

Bank).

1.04 METHODOLOGY

This report is a descriptive one, which was administered by collecting primary and secondary

data. Descriptive Research has an important objective: gives description of something marketing

characteristics of function (Malhotra, 2001) and also the description of phenomenon or


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characteristic associated with an object population (who, what, when, where and how of a topic,

Copper, 2001).

The report tried to evaluate the performance of Export Import Bank of Bangladesh Limited.

Before going in to the deep study, conceptual structure visualized under which the whole study

was conducted.

1.4.1 Sources of Data

This study covered two types of data, which are:

Primary data

Secondary data

(i) Primary Data

Primary data collected through interview with the clients of EXIM Bank Sylhet Branch,

constructed specially for this report.

(ii) Secondary Data

Going through different documents and papers developed by the Bank personnel and by others

are the sources of secondary data.

1.4.2 Collection Procedure of Data

Managers and officers of EXIM from different divisions were the main sources of secondary

data. Interview with the clients of EXIM Bank helped me a lot to understand their attitude

towards EXIM Bank.

1.4.3 Analysis of Data


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Collected data are analyzed to draw the conclusion. All the data have shown in tabular form.

1.05 LIMITATIONS OF THE REPORT

The study is not free from some practical limitations. Following limitations have faced during

the study and the time of working & data collection:

As I worked in branch office I didnt get all the necessary data I required. This was the

main problem that I faced in preparing the report.

Some desired information could not be collected due to confidentiality of bank.

Work load during the internship program at the bank was also a barrier to prepare this

report.

Due to lack of practical experience, some errors might be occurred during the study.

Therefore maximum efforts have given to avoid mistakes.

1.06 TIME LINE FOR THE RESEARCH

July 2005-September 2005 (in Bangladesh)

2.01: ESTABLISHMENT OF EXIM BANK


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Export Import Bank of Bangladesh Limited is a third-generation private commercial bank in the

country with commendable operating performance. The bank was established in 1999 under the

leadership of Late Mr. Shahjahan Kabir, the founder chairman. He had a long experience as a

good banker. A group of highly qualified and successful entrepreneurs joined their hands with

the founder chairman to materialize his dream. In deed, all of them proved themselves in their

respective business as most successful star with their endeavor, intelligence, hard working and

talent entrepreneurship. Among them, Mr. Nazrul Islam Mazumder became the honorable

chairman after the demise of the honorable founder chairman.

This bank starts functioning from 3rd August 1999 with Mr. Alamgir Kabir, FCA as the advisor

and Mr. Mohammad Lakiotullah as the Managing Director. Both of them have long experience

in the financial sector of our country. By their pragmatic decision and management directives in

the operational activities, this bank has earned a secured and distinctive position in the banking

industry in terms of performance, growth, and excellent management.

The Bank conducts all types of commercial banking operations. The core business of the Bank

comprises of trade finance, term finance, working capital finance and corporate finance.

The Bank is also providing personal credit; services related to local and foreign remittance and

several products related services. The scheme of the Bank, which is designed to help the fixed

income group in raising standard of living is competitively priced and has been widely

appreciated by the customers.

The bank has achieved success in all sectors and ended up with the highest ever-operating profit,

which is 46% higher than that of preceding year.

2.02: CORPORATE MISSION OF EXIM BANK


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To provide high quality financial services in export and import trade.

To provide excellent quality customer service.

To maintain Corporate and business ethics.

To become a trusted repository of customers' money and their financial advisor.

To make our stock superior and rewarding to the customers/share holders.

To display team spirit and professionalism.

To have a Sound Capital Base.

2.03: CORPORATE CULTURE OF EXIM BANK

This bank is one of the most disciplined Banks with a distinctive corporate culture. The bank

believes in shared meaning, shared understanding and shared sense making. Their people can see

and understand events, activities, objects and situation in a distinctive way. They mould their

manners and etiquette, character individually to suit the purpose of the Bank and the needs of the

customers who are of paramount importance to us. The people in the Bank see themselves as a

tight knit team/family that believes in working together for growth. The corporate culture the

bank belongs has not been imposed; it has rather been achieved through their corporate conduct.

2.04 SPECIAL FEATURES OF EXIM BANK


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Though EXIM Bank is engaged in conventional commercial banking, it also considers

inherent desire of the religious Muslims; and has launched Islamic banking system and

inaugurates two Islamic Banking Branches in the year 2002 and one Branch in 2003. The

Islamic Banking Branches perform their activities under the guidance and supervision of

a body called Shariah Council.

It is the pioneer in introducing and launching different customers friendly deposit

schemes to tap the savings of the people for channeling the same to the productive sectors

of the economy.

For uplifting the standard of living of the limited income group of the population the

Bank has introduced Monthly Saving Scheme to encourage the common and fixed

income group of people.

The bank is committed to continuous research and development so as to keep pace with

modern Banking.

The operations of the Bank are computerized oriented to ensure prompt and efficient

services to the customers.

The bank has introduced customer relations management system to assess the need of

various customers and resolve any problem on the spot.

The bank has also decided to go for Online Banking facility for the customers in near

future.

2.05: SPONSORS / DIRECTORS OF EXIM BANK


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EXIM Bank is sponsored by a group of businessmen from various business sectors of the

country. The maximum directors are involved in RMG business and they are also renowned

among the business community of the country. EXIM Banks present Chairman Mr. Nazrul

Islam Mazumdr has long experience in garments business. He is also the Chairman of NASA

group of companies.

Md. Nazrul Islam Mazumder

Chairman

Mohammed Lakiotullah

Managing Director

Director Sponsors


8

Late Shahjahan Kabir

Founder Chairman

Alamgir Kabir, FCA

Former Advisor

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Mr.Md. Nazrul Islam Swapan

Mr. Mohammad Abdullah

Mr.Md. Altaf Hossain

Mr.Md. Faiz Ullah

Mr.Md. Mazakat Harun

Mr.Md. Fahim Zaman Pathan

Mrs. Nasima Akhter

Engr.Mr.Md. Aminur Rahman Khan

Mr. A.K.M. Nurul Fazal Bulbul

Mr.Md. Zubayer Kabir

Mrs. Rizwana K. Riza

Mr.Md. Habibullah

Mr.Md. Nur Hussain

Mr. Anjan Kumar Saha

Mr.Md. Abdul Mannan

Mrs. Hasina Akhter

Mrs. Rabeya Khatoon

Mrs. Mahmuda Begum

Mrs. Nasreen Islam

Mrs. Asma Begum

Mrs. Sabira Sultana

Mrs. Mamtaj Begum

Mr.Md. Shaiful Alam

Mrs. Hamida Rahman

Mr.Md. Meer Joynal Abedin

Mr.Md. Nurul Amin

Mrs. Nahida Akter

Mr. Muhammed Shahidullah

Mr.Md. Abdullah Al-Mamun

Mrs. Rubina Shahid

Al-Haj Mr. Md. Nurul Amin

Mr.Md. Abdullah Al-Zahir Sawpan

2.06: BRANCHES OF EXIM BANK


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The Bank operates through its Head Office at Dhaka and its 25 branches. The branches are

located in the following regions.

Branch Name LocationMotijheel Branch Dhaka

Panthapath Branch Dhaka

Agrabad Branch Chittagong

Khatungonj Branch Chittagong

Gazipur Branch Gazipur

Imamgonj Branch Dhaka

Gulshan Branch Branch

Sonaimuri Branch Noakhali

Sylhet Branch SylhetNawabpur Branch Dhaka

Narayangonj Branch Narayangonj

Shimrail Branch Dhaka

Islami Banking Branch Mothijheel, Dhaka

Eskaton Branch Dhaka

Islami Banking Branch Uttara, Dhaka

Laksham Branch Comolla

Mirpur Branch Dhaka

Jubilee Road Branch ChittagongElephant Road Branch Dhaka

Mawna Dhaka

Bogra Bogra

Jessore Jessore

Malibag Dhaka

Ashulia Dhaka

Ashugonj Ashugonj

The Bank also carries out international business through a Global Network of Foreign

Correspondent Banks.

2.07: USE OF PROCEEDS


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The public issue is the compliance of statutory requirement of the bank. The proceed will

strengthen the capital base of the bank and augment business expansion. The proceeds of the

present issue of 31,38,750 ordinary share at Tk.130.00 each (including a premium of Tk. 30.00

per share) amounting to Tk. 408,037,500.00 would be utilized in the normal lending and

investment business of the bank.

IPO EXPENSES:

Detailed of estimated Public Issue expenses are shown below:

Particulars Amount

(in Tk)

Manager to the issue fee

Securities & Exchange Commission fees

Underwriting Commission (0.50% of Tk. 204.019 million)

Fees of Securities & Exchange Commission (0.30% of Tk. 408.037

million)

Brokerage Commission (assumed 20% of IPO, i.e., 1% of Tk. 81.60

million)

Banker to the Issue (0.25% of Tk. 408.037 million)

Listing fee to DSE or CSE (0.25% on Tk. 721.912 (313.875+408.037

million)

Printing of Prospectus (Estimated or at actual)

650.000.00

10.000.00

1,020,094.00

1,224,113.00

816,075.00

1,020,094.00

1,804,781.00

100,000.00

400,000.00

140,000.00


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Advertisement in one daily newspaper (full prospectus) (cost or at actual)

Advertisement of abridged version of prospectus and notices etc.

(Estimated or at actual)

Arrangement of lottery

CDBL related expenses

Post Issue Expenses (Estimated or at actual)

60,000.00

204,525.00

650.000.00

Total 8,099,682.00

Table 1: Initial Public Offering expense of EXIM Bank

Source: EXIM Bank Prospectus

2.08: DESCRIPTION OF BUSINESS

(1) EXIM Bank at a Glance

2001 2002 2003 2004 Growth

Authorized Capital 100.00 100.00 100.00 100.00 0%

Paid up Capital 25.31 25.31 31.39 62.78 100%

Reserve Fund 11.96 22.95 55.78 93.84 68.23%

Deposits 726.37 994.52 1524.30 1909.57 25.28%

Investment (Loan,

advances)

531.15 795.46 1228.91 1768.22 43.89%

Investment 82.91 141.90 237.70 154.29 - 35.09

Foreign Exchange

Business (import)

851.97 1315.25 1926.01 2678.17 39.05%

Foreign Exchange

Business (export)

744.22 1008.83 1512.46 2241.85 48.23%


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Remittance 40.28 27.76 23.50 11.38 - 51.57%

Operating Profit 28.38 40.40 60.64 88.56 46.09%

Fixed Assets 9.43 11.10 12.77 15.08 18.09%

Investment as % of Total

Deposit

70.65% 79.89% 80.62 92.60 14.86%

Number of Foreign

Correspondents

175 178 185 196 5.95%

Number of Employees 356 500 627 774 23.44%

Number of Branches 10 16 19 24 26.32%

Cost of Fund 9.25% 9.29% 9.26% 8.40% - 9.29%

Cost of Fund with E.C. 11.71% 11.70% 11.30% 10.36% - 8.32%

Return on Assets 3.18% 3.37% 3.39% 3.08% - 9.14%

Table 02: EXIM Bank at a glance

Source:EXIM Bank Prospectus

From the above table we see that the trend of paid up capital is upward. This upward

trend indicates that investors are buying more and more shares at high price.

Investment is also showing an upward trend. This indicates that borrowers of EXIM Bank

are taking more loans and the bank is also extending its range of loans.

Foreign exchange business handled by the bank is also showing an upward trend. As the

export and import business handled by EXIM Bank is increasing, so it is contributing in

the national economy through international business.

The growth of operating profit is fairly attractive. From the above table it is very much

clear that operating profit of EXIM is increasing at a decent rate in every successive year.


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This indicates that the operating efficiency of the bank is increasing at a rapid pace and

the bank is able to reduce its operating cost.

The number of branches of EXIM is also increasing. This increasing number of bank

branch indicates that EXIMs geographical coverage is increasing and the bank is

expanding its operation.

It indicates that asset efficiency of the bank is increasing and assets are utilized in

efficient way.

(2)Business Operations:(i) Main Products of Services: Contribution to Revenues:

Revenue income from the main products/services during the past years as follows:

Description 2003 2002 2001

Interest income 1,396,081,422 932,241,186 621,331,381

Income from investment 121,535,735 68,974,876 54,282,759

Commission, Exchange & Brokerage 379,929,474 272,673,777 211,864,118

Gain on sail of investment in shares 9,669,915 7,615,723 28,761,610

Other operating income 54,696,256 35,049,507 24,626,157

1,961,912,802 1,316,555,069 940,866,325

Table 03: Sources of income of EXIM Bank


(iii) Special Products and Services:


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Export Import Bank of Bangladesh Limited launched several financial products and services

since its inception. Among the are Monthly Savings Scheme, Super Savings Scheme, Education

Savings Scheme, Multiplus Savings Scheme, Smart Saver Scheme. All of these have received

wide acceptance among the people.

Monthly Savings Scheme:

The prime objective of this scheme is to encourage people to build up a habit of saving. In this

scheme, one can save a fixed amount of money every month and receive substantial lump sum of

money after five, eight, ten or twelve years.

Super Savings Scheme:

Under this scheme, customer has to deposit a fixed amount of money for five years and in return,

he will receive the benefits on monthly basis. Benefits start right from the first month of opening

an account under the scheme and will continue up to five years when the depositor will get

refund of his deposit. This scheme is a sure investment for a steady return.

Multiples Savings Scheme:

Savings help to build up capital and capital is the prime source of business investment in a

country. Investments take the country towards industrialization, which eventually creates wealth.

This is why savings are treated as the very foundation of development. To create more awareness

and motivate people to save EXIM Bank offers Multiples Savings Scheme. Any individual,

company, educational institution, government organization, NGO, trust, society tee

SWIFT Service:


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The SWIFT Service help in sending and receiving the messages and instructions related to

NOSTRO Account operations and L/C related matters. The bank has brought 6 branches under

SWIFT network.

Competitive Conditions in the Business

The bank sector comprises of monolith public sector consisting of four major commercial banks,

and three DFI and a large number private commercial banks including about a dozen foreign

owned private banks. They severally compete for savings/deposits and are in search of sound

investment/lending targets. Despite stiff competition, the private sector banks are earning

significantly increasing profit, especially those having strongly professionally managed

operations.

2.09: DESCRIPTION OF PROPERTY

1. The banks business is principally operates through its Head Office at Dhaka and its branch

offices on different locations on rented premises. However, the bank owns the following

operating assets at written down value as given value.

As at

Dec 31, 2003

As at

Dec 31, 2002

As at

Dec 31, 2001

1. Furniture and Fixtures 18,874,116 17,709,390 13,305,532

2. Office Equipment 45,624,221 35,406,740 29,436,417

3. Interior Decoration 59,963,843 53,406,740 45,021,751

4. Vehicles 3,148,271 3,991,645 6,333,986

5. Books 114,036 173,955 194,527

Table 04: Description of property


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2. The bank itself owns the entire fixed assets.

3. There is no mortgage or lien on the property.

4. There is no leasehold property by the bank except premises of the Head Office and Branches

on lease/rental basis.

2.10: RISK FACTORS AND MANAGEMENT PERCEPTION

REGARDING RISKS

Export Import Bank of Bangladesh Limited is a third generation private commercial bank in the

country with commendable operating performance. Directed by the mission to provide prompt

and efficient services to clients, EXIM Bank has successfully celebrated its sixth year of

operation. It provides a wide range of commercial services. The Bank has achieved success

among its peer group within a short span of time with its professional and dedicated team of

management having long experience, commendable knowledge and expertise in convention with

modern banking.

With all its resources, the management of the bank firmly believes that the bank would be able to

encounter problems that may arise both at micro and macro economic levels.

However, the prospective risk factors and the plan of the management to reduce such risks are

given below:

01. Liquidity risk usually arises if the customers lose confidence in the financial institute/bank or

if they find a more attractive investment opportunity. The liquidity risk also arises if liabilities


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are not matched with the advances made or exposure is concentrated in a particular sector. EXIM

Bank might face such risk like other banks.

# The management of the bank is maintaining an efficient portfolio in order to have a healthy

growth and retain customer satisfaction. In order to avoid asset liability mismatch the

management of the bank is constantly monitoring the banks business portfolio. The bank has a

Well-diversified and balanced advance portfolio consisting of agriculture, industrial, garments,

import construction, trade & commerce, export, transport, consumer, and other sectors. The

liquidity risk is minimized to maximum extent.

02. Interest rate risk arises due to interest rate fluctuation in the financial market. Change of

interest rate in the international market situation is also likely to affect the bank interest rate in

Bangladesh. Interest rate is free floating and different banks offer different interest rates. If any

bank takes deposits at high interest rate then the risk becomes greater. Government of

Bangladesh has also emphasized to reduce the spread of interest rate, which will effectively

reduce the earnings of the banks. EXIM Bank might also be a subject to such risk.

# The management of the Bank is prudently monitoring the market situation to keep the deposit

interest rate at minimum and also trying to invest at a reasonable rate to increase the profitability

of the Bank. Also efficient management of portfolio would reduce the amount of classified loans

to a minimum level, which at the end will sustain the earnings of the Bank.

03. The present instability and slump in the world economy may affect the overall economy of

the country and the banking system as well.


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# EXIM Bank is engaged in modern banking. It is expected that EXIM Bank by its efficient

Asset and Liability management will be able to maintain its trend of growth and thus overcome

the threat.

04. As per requirement of the Bangladesh Bank, BRPD Circular no-10, dated March 30, 2003,

all Commercial Banks working in Bangladesh are required to maintain Paid-up Capital and

reserves at least Tk. 100.00 crore by March 10, 2005 provided at least 50% of the required

adequacy will have to be met by March 10, 2004. If the requirement of the Capital adequacy as

mentioned above cannot be met by the Bank within the stipulated time, Bank will not be eligible

to pay dividend to the shareholders.

# The management of the Bank is planning to meet the required capital adequacy within the

stipulated time frame. For any reason, if the situation does not permit to meet the requirement,

the bank has option to declare stock dividend instead of cash dividend.

05. Deteriorating asset quality originating from inadequate/inappropriate risk appraisal by the

banks, slack monitoring of outstanding debts by them, inadequate/inappropriate documentation

secured by the banks and other form of management deficiencies.

# EXIM Bank has been able to maintain a very low classified portfolio over the last six years of

operations. Its present classified portfolio stands very low of the total loan portfolio in the year

2003. This demonstrates the Banks professional management ability.

06. Increased provisioning requirement arising out of creeping classified debts resulting in less

than anticipated distributable profits and eventual lower dividend payout. This could be a local

issue for a relatively new bank. Bangladesh Banks present stipulation in classification of loans

and consequent provisioning requirement after four years of operation of any bank is evident.


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# While the management of the bank recognizes this risks, it has so far demonstrated its ability to

maintain a very low classified portfolio and thus very low provisioning requirement, which has

always been adequately addressed. Moreover, the bank has declared 25% cash dividend and

12.50% stock dividend in 2001. In 2002, the Bank has declared 8% cash dividend and 24% stock

dividend.

07. Every bank carries some contingent liabilities in their books, as it is generic to the nature of

their business. Should any significant portion of such contingent liability become actual?

Liability at any point of time due to client default, the profitability of a bank maybe affected

negatively?

# EXIM Bank carries contingent liability in its books as a natural course of business and the

quality of contingent liability carried by the bank at any point of time is not significantly high

compared to the size of its balance sheet in general and reserves in particular.

08. Unfair and hostile competition in the banking industry leading to price-cutting and entrance

of other financial institution in the traditional banking and quasi-banking services, including

formal banking, i.e. money changers, money lenders and brokers, unauthorized syndication,

underwriters etc.

# Recognizing these risks, EXIM Bank has, since its inception, focused on diversified client base

with an innovative and differentiated product base. This strategy has been rewarding for EXIM,

and it plans to remain innovative in future also by way of creating new markets for its products.

09. Should one or more banks in the country fail to perform or become bankrupt at any point of

time, a general lack of confidence in the market may affect EXIMs business negatively.


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# This risk is absolutely external to the Bank and could affect any financial institution operating

in the country. EXIM does not have any specific antidote to this risk, except its reputation and

image. The Bank carries out all of its activities in such a way as will help create a lasting

confidence among the public.

10. Deep and frequent exchange rate fluctuation negatively impacting on import and/or export

business of the clients.

# Foreign exchange risks originating from transactions have always been professionally

managed.

11. A banks ability to operate profitability is directly related to the monetary and fiscal policy of

the country at any given point of time. Imposition of restrictive monetary and/or fiscal policy by

the government at any time may affect a banks profitability negatively.

# Neither EXIM Bank nor any other commercial bank can effectively combat this risk. However,

EXIM Bank having small and targeting niche markets is likely to be less affected by restrictive

monetary and/or fiscal policy.

12. Inability to cope with competitiveness faced from other banks due to lack of up-to-date

technology, innovativeness in product development and skilled human resources.

# Although EXIM Bank is yet to be fully automated the Bank has adequate technology to meet

its present requirement and it proceeding aggressively to enhance its technology level. Many

products are introduced in the market in recent days and more innovative and diversified

products are in the offering. The products are well received by the market, which is evident from

the growth pattern of those products. The bank is recruiting fresh university graduates on regular

basis and arranging training for them both from its own and other training institutions. Side by


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side the Bank is hiring experienced and skilled human resource in an effort to balancing out the

need of the Bank in various fields of its operation. The bank has also introduced various welfare

schemes for its employees with a view to retain its trained and experienced human resources on

longer term basis and to create a sense of belongingness. The bank Management believes that

lower employee turnout ratio will improve productivity of the banking future.

13. Investors should keep in mind that equity security entails un-quantified risk and reward

possibility, including leading towards total erosion of investment in extreme cases.

# The risk is inherent to all equity securities and is not specific to the security of EXIM Bank.

14. The Bank has made adequate provision on loans and advances as per Bangladesh Banks

circular. But in future, any increase in loan loss provisioning might have adverse impact on

probability as well as net worth.

# The Management has been following a Loan and Advance Policy, which will be continued in

future. Therefore, it is expected that the loan loss provisioning in future will be within tolerable

limit having little material impact on future profitability as well as net worth.

15. The bank has been rated by the CRISL on September 08, 2003 under Credit Rating Rules,

1996 of the Securities and Exchange Commission. CRISL assigns BBB rating to Export Import

Bank of Bangladesh Limited in the long term and ST-3 rating in the short term on the basis of

the banks good fundamentals, superior asset quality, maintaining required capital adequacy,

moderate profitability, moderate liquidity and limited market share. Financial institutions rated in

this category fall under the CRISL category of investment grade and are adjusted to offer

moderate degree of safety for timely repayment of financial obligations. This level of indicates


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that the bank has yet to overcome weakness in some areas of operation but has the capability to

overcome the abovementioned limitations with persistent efforts.

# Risk factors are more variable inn period of economic stress than those rated in the higher

categories. The short-term rating indicates good certainty of timely payment. Liquidity factors

are sound in the short run. Although ongoing funding need may enlarge total financial

requirements, EXIMs recent move to issue shares to raise Tk. 408.04 million from the capital

market is good to mitigate on going finance need. EXIM is a third generation private bank in the

country and performing above average as compared to the peer banks. As on June 30, 2003

EXIMs loans and advances stood at Tk. 9.48 million total deposit of Tk. 10.92 billion. With

0.23% infection in its loan portfolio, EXIM earned Tk. 109.43 million during the same period.

16. Bangladesh Bank granted approval to EXIM Bank to operate as Islamic Bank. As there are

other Islamic Banks operating in the country, the EXIM Bank may face competition for its

conversion into Islamic banking after five years of operation.

# As EXIM Bank is performing well in traditional general banking and there is a good demand

for Islamic Banking, the management of the Bank is also expecting god result in Islami banking

operation.

17. As per audited accounts of December 31, 2003, the Bank has capital inadequacy (7.25%) in

terms of Risk weighted Assets (RWA) whereas standard requirement is 9%.

# on completion of IPO the bank will meet its capital adequacy.

18. The bank did not distribute any dividend for the year ended on December 31, 2003.


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# The sponsoring shareholders are entitled to avail dividend out of the retained profit and balance

shown in premium account as per audited financial of December 31, 2003. The dividend will be

distributed in due course with the approval of Bangladesh Bank.

19. CRISL assigned BBB rating on September 08, 2003 to Export Import Bank of Bangladesh

Limited in the long term and ST- 3 rating in the short term. As per international practice long

term remains valid for one year and short term remains valid for six months. Hence the short-

term rating is no longer valid.

# The management is in the opinion that the performance 9of the bank is getting much better

than that period of CRISL rating dated September 08, 2003.

3.01 ANALYSIS OF PROFIT AND LOSS ACCOUNT

Profit and Loss Account

Export Import Bank of Bangladesh Limited

For the year 31st December 2004

Notes 2004 2003 2002


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Taka Taka Taka

Investment income

Profit paid on deposits, borrowings

etc

Net Investment Income

20

21

1,820,283,897

1,145,511,622

= 394,772,275

1,396,081,422

1,121,309,068

= 274,772,354

932,241,186

728,365,599

= 203,875,587

Income from investment in

-shares/securities

Commission, exchange and

-brokerage

Gain on sale of investment in shares

Other operating income

Total Operating Income

22

23

24

78,639,501

597,695,893

73,643,453

74,325,865

=1,219,076,987

121,535,735

379,929,474

9,669,915

54,696,256

= 840,603,734

68,974,876

272,673,777

7,615,723

35,049,507

= 588,189,470

Salaries and allowance 25 183,089,157 134,004,574 95,627,987

Rent, taxes, insurance, lighting etc 26 50,456,074 41,076,938 29,607,526

Legal expenses 27 1,090,982 522,184 168,084Postage, stamp, telegram and

telephone

Audit fees

28 20,740,411

181,750

14,677,332

156,750

13,694,330

150,000

Stationery, printing, advertisements

etc

Managing Directors remuneration

Managing Directors fees

29

18,993,547

2,400,000

317,500

13,299,014

2,184,000

292,500

11,138,022

2,006,710

260,000

Directors fees 30 3,130,000 2,613,672 2,462,500

Depreciation on and repairs to

banks property

31 26,127,561 19,733,147 16,053,632

Other expenses 32 76,742,592 49,381,699 30,223,666


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Total Operating Expense = 383,269,574 = 277,941,810 = 201,392,457

Profit before Provisions 835,807,413 562,661,924 386,797,013

Provisions for investment

For diminution in value of

investment in share

Total Provisions

33 190,169,211

-

= 190,169,211

84,154,418

-

= 84,154,418

29,080,970

19,693,258

= 48,774,228

Profit before Tax = 645,638,202 = 478,507,506 = 338,022,785

Provision for tax 263,840,039 223,715,350 136,600,000

Profit after Tax = 381,798,163 = 254,792,156 = 201,422,785

Retained earnings brought forward

Transfer from share premium

40% cash dividend for 2003

10% dividend distribution tax

Transfer to dividend equalization

account

Adjustment for (under)/over

provision for -tax made in earlier

years

123,621,836

82,575,000

(125,550,000)

(12,555,000)

(62,775,000)

-

5,316,836

2,131,181

-

-

-

-

(37,600,000)

(35,468,819)

17,226,625

-

-

-

-

1,088,672

16,137,953

Profit Available for Appropriation = 387,114,999 = 219,323,337 = 217,560,738


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Appropriations:

Statutory reserve

Proposed cash dividend

Proposed issue of bonus shares

(@ 10 -shares per 25 shares held )

Share premium on bonus share

13

129,127,640

-

251,100,000

-

= 380,227,640

95,701,501

-

-

-

= 95701,501

67,604,557

20,250,000

60,750,000

66,825,000

= 215,429,557

Retained Earnings Carried Forward

6,887,359 123,621,836 2,131,181Earnings Per Ordinary Share 60.82 81.18 79.14

Table 5: Profit & Loss Account of EXIM Bank


From the above table we see that in the year 2002 net investment income were

203,875,587 Tk. In the year 2003 it increased to 274,772,354 Tk and in 2004 it further

increased to 394,772,275 Tk. Here we see that investment income has increased at every

year. It indicates that the bank is earning more profit from investment at every subsequent

year.

From the above table it is evident that total operating income of the bank is also

increasing. In the year 2002 total operating income of the bank were 588,189,470 Tk. In

2003 it increased to 840,603,734 Tk and in 2004 it further increased to 1,219,076,987 Tk.

Thus we see that total operating income of the bank has increased more than 100% in the

last three years


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Earning per share (EPS) of a bank is an important indicator of profitability. From the

above table we see that EPS of EXIM has decreased significantly in the year 2004 by

about 20 Tk per share, which is a dangerous signal for the bank.

3.02 ANALYSIS OF BALANCE SHEET

Export Import Bank of Bangladesh Limited

Balance Sheet at 31st December 2004

Notes 2004

Taka

2003

Taka

2002

Taka

Property and Assets

Cash:

In hand (including foreign

currencies)

With Bangladesh Bank and

Sonali Bank (including foreign

currencies)

3

190,152,334

1,019,146,505

129,871,767

563,793,875

163,672,719

440,885,038


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= 1,209,298,839 = 693,665,642 = 604,557,757

Balance with other banks and

financial institutions:

In Bangladesh

Outside Bangladesh

4

748,839,964

461,948,589

= 1,210,781,553

805,135,395

319,241,380

= 1,124,376,775

524,993,436

25,997,751

=550,991,187

Money at call and short notice 5 - 605,000,000 360,000,000

Investment (shares and bonds):

Government Securities

others

6

1,500,689,600

42,295,814

=1,542,985,414

2,200,360,200

176,713,581

=2,377,073,781

1,230,641,100

188,360,191

=1,419,001,291

Loans and advances:

General Investment

Bills discounted and purchased

7

18,005,716,816

1,326,719,256

=19,332,436,072

11,324,591,109

964,529,067

=12,289,120,176

7,481,509,504

473,052,532

=7,954,562,036

Fixed assets 8 150,822,688 127,724,487 110,983,041

Other assets 9 909,426,885 671,696,525 374,607,103

Non-banking assets - -

Total assets 24,355,751,451 17,888,657,386 11,374,702,415

Liabilities and Capital

Liabilities

Borrowing from other banks,

financial institutions and agents

- - -

Deposits and other accounts:

Current deposits and other

10


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accounts

Bills payable

Savings bank deposits

Bearer certificates of deposits

Term deposits

Call deposits

Foreign currency deposits

2,012,789,637

138,047,759

1,159,670,831

-

15,716,470,619

-

51,196,943

=19,078,175,789

1,258,920,268

101,050,630

998,239,535

-

12,027,460,890

820,000,000

37,297,082

=15,242,968,405

888,422,787

60,615,707

613,662,425

221,054,432

7,005,226,249

1,135,000,000

21,244,932

=9,945,226,532

Other liabilities 11 3,877,570,922 1,897,414,904 878,143,962

Total liabilities 22,955,746,711 17,140,383,309 10,823,370,494

Capital/shareholders Equity

Paid up capital 12 627,750,000 313,875,000 253,125,000

Proposed issue of bonus shares 13 251,100,000 - 60,750,000

Share premium 14 94,162,500 82,575,000 82,575,000

Dividend equalization account 15 62,775,000 - -

Statutory reserve 16 357,329,881 228,202,241 132,500,740Retained earnings 17 6,887,359 123,621,836 2,131,181

Total shareholders equity 1,400,004,740 748,274,077 551,331,921

Total liabilities and

shareholders equity 24,355,751,451 17,888,657,386 11,374,702,415

Off Balance Sheet Items


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Contingent liabilities:

Acceptance and endorsements-

Letters of guarantee

Irrevocable letters of credit

Bills for collection

Other contingent liabilities

18

859,399,747

5,009,355,187

451,115,577

2,679,607,500

521,386,572

2,383,041,275

536,126,303

4,457,007,820

208,788,385

2,249,814,615

220,107,612

1,931,507,631

Total contingent liabilities 8,999,478,011 7,897,561,970 4,610,218,243

Other commitments - - -

Total off balance sheet items 8,999,478,011 7,897,561,970 4,610,218,243

Table 6: Balance sheet of EXIM Bank


In the above table we see that total asset of EXIM has increased over the last three years.

Increase of total asset means additional investment by the bank. Both current and fixed

assets have increased significantly. Increase of current assets such as cash indicates more

liquidity of the bank. Increase of fixed assets indicates investment in long term for future

operation.

Besides assets, total liability of the bank has also increased significantly. Increase of

liability reduces the banks solvency both in short and long term.

From the above table we also see that total shareholders equity of EXIM has increased

very rapidly. Increase of shareholders equity means there are more owners as well as

more stake of the shareholders in the operational and financial activities of the bank.


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3.03 FINANCIAL RATIO ANALYSIS

Analysis of Balance Sheet Ratios

01. Liquidity Ratios

Liquidity ratios are used to measure a firms ability to meet short term obligations. They

compare obligations to short term resources available to meet these obligations. From these

ratios, much insight can be obtained into present cash solvency of the firm and the firms ability

to remain solvent in the event of adversity.

Now we should analyze various liquidity ratios of EXIM Bank:-

a) Current Ratio

One of the most general and frequently used of these liquidity ratios is current ratio:-

Current Asset

Current Liability

Current ratio for EXIM Bank for year end 2003 was:

2,42,30,42,417

1,35,99,70,898

= 1.78

Current ratio for EXIM Bank for year end 2004 was:

2,42,00,80,392

2,15,08,37,396

=1.13

The current ratio of a firm measures its short term salary that is its ability to meet short term

obligations. As a measure of current financial liquidity it indicates Taka of current assets


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available for each Taka + current liability. In the year 2003, Tk. 1.78 of current asset was

available to meet Tk.1.00 of current liability. In 2004, Tk. 1.12 of current assets was available to

meet Tk. 1.00 of current liability.

In both the year current ratio is more than 1 which means that the Bank is able to meet its current

obligation, but as it is less than 2 or not much larger than 1, so the margin of safety to the short

term creditor is not much larger.

2. LEVERAGE RATIO:

(a) Debt to Equity Ratio:

To assess the extant to which the firm is using borrowed money, we may use several different

debt ratios. The debt to equity ratio is computed by simply dividing the debt of the firm by its

shareholders equity.

Total debt

Shareholders Equity

For EXIM Bank, 2004 year-end ratio was:

22955746711

1400004740

= 16.39

At the year-end 2003, this ratio was:

17140383309

748274077

= 22.90

D/E ratio is the ratio amount invested by investor to the amount invested by the company. The

ratio measures the capital structure of the Bank. The long term solvency would judge the


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soundness of a firm on the basis of the long term financial strength measured in terms of its

ability to pay the interest regularly as well as repay the installment of the principle on due dates

or in one lump sum at the time of maturity. The long term solvency of a firm can be examined by

using leverage ratios.

In the year 2003, the creditors of EXIM Bank provided Tk. 22.90 for each Tk. 1.00 being

provided by shareholders and in the year 2004, creditors provide Tk. 16.39 for each Tk. 1.00

being provided by shareholders of the Bank.

The leverage ratio of EXIM Bank is very high and it is a danger signal for the creditors because

the owners are putting up relatively less money of their own. If the project of the Bank fails

financially, the creditors will lose heavily. Moreover, with a small financial stake in the firm, the

owners may behave irresponsibly and indulge in speculative activity. The greater the D/E ratio,

the greater is the risk to the creditors.

A high D/E ratio has equally serious implication from the firms point of view also. A high

proportion of debt in the capital structure would lead the inflexibility in the operations of the firm

as creditors would exercise pressure and interfere in management.

(b) Debt to Asset Ratio

The debt to asset ratio is defined by dividing a firms total debt by its total assets:

Total Debt

Total Assets

For EXIM Bank this ratio for 2003 was

17140383309

17888657386

= 0.95


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This ratio for 2004 was

22955746711

24355751451

= 0.94

The above ratio measures the share of total asset financed by outside funds. We see that in 2003,

95% of banks assets are financed with debt of various types and the remaining 5% of the

financing came from shareholders equity. In 2004, 94% of assets are financed by debt and only

6% came from shareholders equity. The banks debt to equity ratio is very high. Because of this

high ratio the bank is in high financial risk. As the percentage of financing provided by

shareholders equity is very small so the cushion of protection to the banks creditors is very low.

3. Coverage Ratio

(a)Profit coverage ratio:

Coverage ratios are designed to relate the financial charges of a firm to its ability to service, or

cover, them. Bond rating services, such as Moodys Investors Service and Standard & Poors,

make extensive use of these ratios. One of the most traditional of the coverage ratios is the

interest coverage ratio, or times interested earned.

Earning Before Tax

Profit Paid on Deposits, Borrowings

Profit coverage ratio of EXIM Bank in 2003 was:

1599816574

1121309068

= 1.42

Profit coverage ratio of EXIM Bank in 2004 was:


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2071149824

1425511622

= 1.45

This ratio serves as one measure of firms ability to meet its profit payment and thus avoid

bankruptcy. The profit coverage ratio of EXIM Bank is very low. This low ratio is a danger

signal that the bank is using excessive debt and greater the likelihood that the bank could not

cover its profit payment without difficulty. EXIM Banks to cover annual profit payment 1.45

times in 2004 and 1.42 times in 2003 appears to provide a very low margin of safety.

(b)Dividend Coverage Ratio

This ratio measures the ability of a firm to pay dividend on shares which carry a stated rate of

returns.

Earning After Tax (EAT)

Cash Dividend

This ratio for EXIM Bank in 2004 was

381798163

125550000

= 3.04

This ratio is high and it reveals safety margin available to the shareholders.

4. PROFITABILITY RATIO

(a) Return on Investment (ROI)

This ratio is measured in terms of the relationship between net profits and assets. ROI is:

Net Profit After Taxes


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Average Total Assets X 100

ROI for EXIM in 2003 was

242792156

17888657386 X 100

= 1.35%

For the 2004 ROI was

381798163

24355751451 X 100

= 1.56%

Here we see that although ROI of 2004 has slightly increased from previous year but it is still

very low.

(b) Return on Capital Employed (ROCE)

ROCE =


Average Total Capital Employed X 100

ROCE for EXIM Bank for the year 2003 was:

254792156

7841685077 X 100

= 3.24%

(c) Return on Equity (ROE)

This profitability ratio carries the relationship of return to the sources of funds yet another step

further.


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ROE =


Shareholders Equity X 100

ROE for EXIM Bank in 2004 was

381798163

1400004740

= 27.27%

ROE for 2003 was

254792156

748274077

= 34.05%

This ratio tells us the earning power on shareholders book value investment. The ROE of EXIM

Bank is high and it reflects the banks acceptance of strong investment opportunity and effective

expense management.

(d) Earning Per Share (EPS)

It measures the profit available to the equity shareholders on a per share basis that is the amount

they can get on every share held.

EPS =

Net Profit Available to Equity holders

Number of Ordinary Shares Outstanding


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EPS for EXIM Bank for the year 2003 was Tk. 81.18 per share and for the year 2004 the EPS

was Tk. 60.82 per share.

(e) Dividend per Share (DPS)

This ratio reveals the dividends paid to shareholders on a per share basis.

DPS =

Dividend Paid to Ordinary Shareholders

Number of ordinary shares outstanding

DPS for the year 2003 was

12550000

3138750

= 3.99

(f) Price Earning (P/E) Ratio

P/E Ratio =

Market Price of Share

EPS

P/E ratio of EXIM Bank for the year 2003 was

407.53

81.18

= 5.02

The P/E ratio reflects the price currently being paid by the market for each taka of currently

reported EPS. In other words the P/E ratio measures investors expectations and the market

appraisal of the performance of the bank.


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3.04 TREND ANALYSIS

01. Liquidity Ratio

(i) Current Ratio:

The current ratio that asset liability ratio is upward sloping.

Current Ratio 2004

Current Ratio 2003

1.13

1.78

= 0.634

From the above calculation we can see that current ratio of 2004 is .634 times higher than that of

2003.

02. Debt to Equity Ratio

In 2004 debt is lower than 2003. It reflects that the bank accumulated to reduce its debt.

D/E Ratio 2004

D/E Ratio 2003

16.39

12.90

= 0.72 (Approx)

So, the debt-equity ratio in 2004 is 0.72 times lower than that of 2003.

iii. Debt to Asset ratio:

The debt to asset ratio is almost same in FY 2003 and 2004


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0.94

0.95

Debt to asset ratio is 0.99 times lower in 2004 than that 2003.

iv. Coverage Ratio:

The ratio is upward.

1.45 (2004)

1.42 (2005)

=1.02

Coverage ratio shows the positiveness in the growth of the task. The coverage ratio is 1.02 times

higher in 2003 than 2003.

Dividend coverage ratio is 3.04 in FY 2004.

3.05 FINANCIAL CONDITION

Profit and Operating Results

The Bank has earned an operating profit of taka 562.66 million during 2003 after all provisions

including the 1% General Provision on unclassified Loans and Advances. Provision for Income

Tax for the year amounted to taka 223.71 million resulting in a net profit, after tax, of 254.79

million. The growth in net profit over the previous year is 26.5%.

Deposit

A strong deposit base is necessary for the success of a bank. During the year 2003 the Bank

mobilized a substantial amount of deposits from mid-level income group people under Deposits

Savings Scheme.


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After critical handling the bank mobilized total deposit of taka 15242.97 million as at December

31, 2002.

Advance

The Banks Loans and Advances portfolio also indicates an impressive growth. Total Loans and

Advances amounted to Tk 12289.12 million in 2003 as against Tk 7,954.56 million in 2002 and

the growth rate is 54.49%. This is due to increased commercial and trade financing, term lending

and working capital support. The classified loan position is almost nil. This was achieved by

rendering due attention and monitoring high-risk advances. As a result, classified advance is

amounted to Tk 298.03 MILLION IN 2003. The Bank is trying to operate its credit activities

with the target of achieving Zero classified loans. The sectors financed include Manufacturing,

Trading, Construction, Transport, Agriculture, Fishing & Forestry, Edible Oil, Pharmaceuticals,

Information Technology, and Customer Credit amongst others.

Foreign Exchange Business

International trade constitutes the main stream of business activities of EXIM Bank. It offers a

full range of trade finance and services namely Issue, Advice and Confirmation of documentary

credit; arranging forward exchange coverage; Pre-shipment and post-shipment finance;

Negotiation and Purchase of Export Bills; Discounting bill of exchange; collection of bills,

inward and outward remittance etc.

Import Business

The total Import Business handled by the Bank during 2003 was Tk 19,260.01 million compared

to Tk 13,152.50 million in the previous year showing an increased rate of 46.44%.

Export Business


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The total export business handled by the Bank during 2003 was Tk 15,124.60 million compared

to Tk 10,088.30 million in the previous year showing an increased rate of 49.92%.

Foreign Correspondents

EXIM Bank has correspondents banking relationships with over 78 Banks spread across 68

countries to facilitate cross border trade and payment related services. So far, the Banks total

correspondents are 180. The bank has maintained an excellent relationship with leading

international banks and has successfully established credit lines with major banks to support

global foreign trade business.

Investment

The total investment of the bank stood at Tk. 23, 77.073million as on 31st December, 2003 as

against 1419 million in the previous year showing an increase of 67.52%. The notable

investments represent developments in the treasury bills, shares, prize bonds and others.

Capital and Reserve Fund

The authorized capital of the bank is Tk. 1,000.00 million. Total shareholders equity at the end of

December, 2003 stood at Tk 748.27 million. The paid up capital represents the face value of

3138750 ordinary shares of Tk 100/= each fully paid by the sponsor share holders. The capital

adequacy ratio was 7.25% as on 31st December 2003.

Dividend

EXIM Bank is continuously updating itself with a view to be competitive and to remain the

leader of the banking industry. It has distributed a substantial amount of dividends in the

preceding years and also strengthens the platform of the bank. The percentages of distributions

of dividends are as follows.


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Year Cash Dividend

(%)

Stock Dividend

(Bonus Share)

2000 14% -

2001 25% 12.50%

2002 8% 24%

Table 7: Dividend payment of EXIM Bank


EXIM Bank distributes both cash and stock dividend to its shareholders. From the above

table we see that in 2001 cash dividend was higher (25%) than the stock dividend

(12.5%). But in 2002 stock dividend is higher than cash dividend by 16%.

Maturity Grouping of Investment

2003 2002

On demand 360,200 641,100

More than 3 Months but less than 1 year 50,000,000 -

More than 1 year but less than 5 years 2,150,000,000 1,230,000,000More than 5 years 176,713,581 188,360,191

Total 2,377,073,781 1,419,001,291

Table 8: Maturity Grouping of Investment


From the above table we can understand that EXIM is emphasizing more on long term

investment rather than short term investment. The duration of majority of the bank

investment is 1 to 5 years.

CAPITAL ADEQUACY RATIO


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In accordance with the Instruction of Bangladesh Bank, the bank adopted BIS (Basle Committee

on Banking Supervision) risk adjusted capital standards to measure capital adequacy. Banks in

Bangladesh are required to maintain the ratio of 9% at the minimum against risk weighted assets.

(Tk. in Million)

CORE CAPITAL (TIER-1) 31. 12. 2003 31. 12. 2002

A Paid up Capital 313.87 253.12

Proposed Issued as Bonus Share - 60.75

B Share Premium Account 82.58 82.57

C Statutory Reserve (SR) 228.20 132.50

D Proposed Cash Dividend 20.25

E Other Reserve (OR) - -

F Retained Earnings 123.62 2.13

G Minority Interest in Subsidiaries - -

H Non-cumulative Irredeemable

Preference Shares

- -

Total Core Capital 748.27 551.33

Table 9: Capital Adequacy Ratio


The banks capital adequacy ratio stood at 7.25% at the end December 31, 2003.

The bank reinvested heavily in the year 2003 which is 121 million Tk. higher than the

previous year. More reinvestment means more capability of the bank for earning profit in

the future.

LOANS AND ADVANCES


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Classification of Loan & Advances

Amount in 000

Sl. No. Type of Loan 31.12.2003 % of Total Loan

& Advance

31.12.2002 % of Total Loan

& Advance

A. Unclassified 11,991,089 97.57% 7,946,933 99.90%

B. Classified

I) Substandard 271,057 2.21% 7,629 0.10%

ii) Doubtful 5,757 0.05%

iii) Bad & Loss 21,217 0.17%

Total Loans and Advances 12,289,120 100% 7,954,562 100%

Table 10: Loans and Advances


An important feature of EXIMs loan is that its classified loan is only 0.10% which is

very negotiable. The Bank has no doubtful as bad/losses. It indicates that the Bank is

efficient in loan recovery.

Provision for Classified Loans & Advance:

31st December 2003 31st December 2003

Base for

Provision

Rate Amount Base for

Provision

Rate Amount

A. Classified 11,929,131 1% 119,291 7,910,720 1% 79,107

B. Substandard 164,946 20% 32,989 5,350 20% 1,070

C. Doubtful 50% 50%D. Bad & Loss 12,051 100% 12,051 100%

Total 164,331 80,177

Table 11: Provision for Classified Loans & Advance


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Although the bank has no doubtful or bad debt, it is maintaining a good amount of

provision for bad debt.

Position of Provision

(Amount in 000)

SL. Particulars 31.12.2003 31.12.2002

A. Provision Required 164,331 80,177

B. Provision Made 164,331 80,177

Table 12:Position of Provision


From the above table we see that EXIMs required provisions equals the actual

provisions made by the bank. It indicates that the bank adopts sound strategy regarding

provisions.

SOURCES OF CASH

(i) Internal Sources

31-12-2003 31-12-2002 31-12-2001

Paid up Capital 313,875,000 253,125,000 225,000,000

Proposed Issue of Bonus Shares - 60,750,000 28,125,000

Share Premium 82,575,000 82,575,000 15,750,000

Statutory Reserve 228,202,241 132,500,740 64,896,183

Proposed Cash Dividend - 20,250,000 56,250,000

Retained Earnings 123,621,836 2,131,181 17,226,625


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Total 748,274,077 551,331,921 407,147,808

Table 13: Internal Sources of Cash


From the above table we see that the dominant internal sources of cash are paid-up

capital, statutory reserve and retained earnings. It reflects internal efficiency of the bank.

(ii) External Sources

31-12-2003 31-12-2002 31-12-2001

Deposits 15,242,968,405 9,945,226,532 7,255,016,263

Borrowing - - -

Total 15,242,968,405 9,945,226,532 7,255,016,263

Grand Total 15,991,242,482 10,496,558,453 7,662,264,071

Table 14: External Sources of CashSource: EXIM Bank Prospectus

External source of cash includes deposits and borrowings. it is to be mentioned that the

only external source of EXIM is deposits from clients.

3.06 COMAPARATIVE CASH FLOW STATEMENT:


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Comparative cash flow statement of the bank is as follows:

2004

Tk.

2003

Tk.

2002

Tk.

2001

Tk.

A. Cash flows from operating activities

Interest Receipts 1,836,674,087 1,505,117,977 983,639,141 660,802,253

Interest Payment 1,341,909,520 (1,121,309,068) (728,365,599) (521,318,709)

Dividend Receipts 2,002,721 12,499,180 17,576,921 14,811,887

Fees and Commission

Receipts

597,995,,893 379,929,474 272,673,777 211,864,118

Recovery on loans previously

written off

- - - -

Cash payment to employees 168,596,566 136,188,574 97,634,697 68,940,971

Cash payment to suppliers 19,168,031 399,052 872,804 1,648,569

Income taxes paid 301,252,013 212,463,399 153,924,085 75,615,581

Receipts from other operating

activities

147,969,318 54,696,256 36,198,958 24,626,157

Payment for other operating

activities

158,853,717 124,374,642 89,290,153 65,973,289

Operating profits before

changes in operating assets

and liabilities (A)

594,862,172 358,306,256 240,001,459 178,607,596

Changes in operating assets and liabilities

(Increase)/decrease in operating assets:Statutory Deposit - - - -

Trading security-shares 134,417,767 11,646,610 109,886,192 77,113,999

Fund advanced to other banks - - - -

Fund advanced to customers 5,414,860,530 4,334,558,140 2,823,014,633 2,961,012,548


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Other assets 47,062,947 85,025,075 86,628,320 229,055,465

Increase/(decrease) in Operating Liabilities:

Deposits from other banks 1,721,396,615 1,412,198,000 1,234,390,000 670,009,000

Deposits from customers 5,556,603,999 3,885,543,873 3,924,600,269 2,700,330,015

Liabilities on account of

customers

- - - -

Trading Liabilities - - - -

Other Liabilities 455,408,539 673,801,174 318,617,293 121,401,834

Net cash from operating

activities

347,901,721 1,921,912,698 402,556,516 861,277,363

B. Cash flows from investing activities

Receipts from sale of

securities

1,622,082,514 780,000,000 970,000,000 50,000,000

Payment for purchase of

securities

1,500,000,000 1,750,000,000 1,450,000,000 480,000,000

Purchase of fixed assets 47,892,244 35,232,540 35,207,043 55,452,675Sale proceeds of fixed assets 1,146,326 1,112,500 2,897,157 -

Gain on sale of investment in

shares

- 9,669,915 7,615,723 28,761,610

Net cash from investing

activities

994,450,125 504,694,163 456,691,065

C.Cash flows from financing activities

Issue of ordinary shares 313,875,000 - - -

Share premium 94,162,500 - - -

Dividend paid in cash 138,105,000 20,250,000 56,250,000 31,500,000


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Net cash from financing

activities

269,932,500 20,250,000 56,250,000 31,500,000

D. Net increase in cash and

cash equivalent (A+B+C)

2,632,625 907,212,573 158,387,647 373,086,298

E. Cash and cash equivalent

at the begging of the year

2,423,402,617 1,516,190,044 1,674,577,691 1,301,491,393

F. Cash and cash equivalent

at the end of the year (D+E)

2,420,769,992 2,423,402,617 1,516,190,044 1,674,577,691

Cash and cash equivalent

Cash 1,209,298,839 693,665,642 604,557,757 406,105,565

Balance with other banks &

financial institutions

1,210,781,553 1,124,376,775 550,991,187 772,889,426

Money at call and short notice - 605,000,000 360,000,000 495,000,000

Prize bonds 689,600 360,200 641,100 582,700

2,420,769,992 2,423,402,617 1,516,190,044 1,674,577,691

Table 15: Comparative Cash Flow Statement


If cash inflow is larger than cash outflow it indicates that the bank is operating efficiently.

Operating activities include all these activities which are undertaken by the bank to

perform successful operation. In the above table we see that net cash from operating

activity increase in one year and decrease in the subsequent year.


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Increase of net cash from investing activity indicates that the bank is undertaking more

investment activities. EXIM Banks net cash from investing activity is increasing at every

year.

In the last the bank has rapid progress in financial performance. In 2001 net cash from

financing activity was 31,500,000 Tk and in 2004 it increased to Tk 269,932,500.

3.07 MARKETING ASPECTS

The bank renders selected types of commercial banking services within the stipulation

laid down by the Bank Companies Act, 1991 and directives as received from Bangladesh Bank

from time to time which include among other the followings:

Deposit Schemes

Armed with two Islamic banking branches, the bank offers both conventional and Islamic

saving schemes. Besides conventional deposits e.g. Fixed Deposits, Saving Bank Deposit and

Current Account Deposits etc, the bank has introduced several schemes e.g. Multiplus Savings

(Thirteen Years deposit-More than Triple), Monthly Income Scheme, Super Savings (Eight

Years deposit-More than Double), Education Saving Scheme, Smart Saver (A high return

investment scheme), and Monthly Savings Scheme.

Loans and Advances Portfolio

In recent years a varied type of loans are swelling rapidly. In line with this trend of

product diversification, EXIM offers different conventional credit/investment schemes and the

Islamic Banking products added a new momentum for the bank to increase opportunities for

investment. So far, EXIMs loan and advances portfolio includes Project Finance in the form of

Term Loan, Real Estate Finance, Secured Overdraft against FDR, different security certificates,


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working capital in the form of Cash Credit Hypothecation/Pledge, Import Trade Finance in the

form of PAD/LIM/TR etc, Export finance in the form of Foreign Documentary Bill

Purchased/Packing Credit/Local Foreign Bill Purchased, Higher Purchase & Lease Finance,

Consumer Credit Schemes, Small Loan in the form of general loan, Murabaha, Murabaha post

import, Murabaha T.R., Bai Muazzal both for local trade and export, Izara, Bai Salam.

EXIM Bank has been introducing new products in the market to increase its market base.

3.08 MARKET FOR SECURITIES BEING OFFERED

Dhaka Stock Exchange Limited (DSE)

9/F, Motijheel C/A,

Dhaka- 1000.

Or

Chittagong Stock Exchange Limited (CSE)

CSE Building,

1080 S.K. Mujib Road, Agrabad C/A, Chittagong.

3.09 FINANCIL STRUCTURE

1. Financial Structure

a. Issued and fully Paid up Capital as on 31st December 2003

(Sponsor Holding)

b. Initial Public Offering (IPO)

( including a premium of Tk. 30.00 per share)

313,875,000

408,037,500


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Total Capital Structure after IPO 721,912,500

Table 17: Financial Structure


As required in the Public Issue 1998 all the sponsors shares as detailed in the section Ownership

of the Companys Securities will be subjects to a Lock-in provision for a period of 3 (three)

years, as follows:

The shares, which are subscribed by the sponsors as described in the prospectus, shall be subject

to a Lock-in Period as under:

1. Three years in case of companies intended/intending to go for Initial Public Offering

(IPO) from the Date of its approval thereof by the Commission or from the start of its

commercial operation, whichever is later.

2. A Jumbo Share Certificate (One for each existing Sponsors/Directors/existing

Shareholder) is to be issued covering his respective total holdings. Their share holing

may be converted into market lots only after the expiry of the lock-in-period of three

years.

3. Jumbo share certificates of the sponsors/directors shall be in the custody of a scheduled

bank (other than their own Bank). The name, branch of the bank should be intimated to

the commission. No splitting of share shall be made without prior intimation to the

commission.

Availability of Securities

(i) Details of IPO


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IPO will be of 3,138,750 shares @ Tk 130.00 each (including a premium of Tk. 30.00 per share)

in the following manner:

Number Par Value Premium Total Amount

Tk

01. Total IPO 3,138,750 100 30 408,037,500

02. 10% of IPO r eserved for

Non-Resident Bangladeshis

313,875 100 30 40,803,750

03. 90% of IPO are offered to

the general public

2,824,875 100 30 367,233,750

Table 18: Details of IPO


3.10 ASSET QUALITY

Total asset of EXIM stood at Tk. 13.6 billion on June 30, 2003 of which 5.35% is

financed by shareholders fund and 82.22% is financed by the depositors. Overall asset quality of

EXIM is good though not the best in the peer group. EXIM has steeped into the fifth year of

operation with only 0.23% gross NPL ratio although 0% for the same ratio in the peer group is


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available. However, EXIM is maintaining a better asset quality considering the peer average for

gross NPL ratio (2002: 0.42%).

During FY 2002, EXIMs total asset increased by 20% compared to that of EFY 2001.

This growth rate was 42% for the year 2001. As at EFY 2002 EXIMs total loans and advances

increased by 55% as against the industry and peer growth rate 17% and 44% respectively for the

year 2002. The banks total loan portfolio further increased by 19% as at 1H 2003. These high

growth rates in peer average for the earlier years are in fact inflated because of small base effect.

However, EXIM attained faster growth considering the ongoing economic scenario of this

country. 3rd generation banks are often criticized for their fast banking practice and EXIM seems

to be keeping pace with the peers in this respect where the bank is supposed to be more cautious

in selecting borrowers to maintain the quality of its assets.

(i) Non Performing Loans (NPL)

As on 30th June 2003, non performing loans of EXIM stood at Tk. 21.80 million against

its total loans and advances of Tk. 9.48 billion which is only 0.23%. During EFY 2002 the same

ratio was 0.10%. This seems to be commendable when compared to the industry average of

31.37% of the total banking sector and 17.38% of the PCBs as on June 2002. Peer Group Gross

NPL ratio for EFY 2002 was 0.42%. During EFY 2002 infection started in its loan portfolio. But

comparing to peer group average, the bank is in a better position. As the above portfolio of

EXIM has been developing for more than 3.5 years, small gross NPL ratio (0.23%) cannot

sufficiently speak all about the quality of assets of the bank.

Decomposition of NPL

(Million Tk)

2004 1H 2003 Dec, 2002 Dec, 2001 Dec, 2000


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Substandard 13.01 7.63 0 0

Doubtful 3.34 0 0 0

Bad/Loss 5.45 0 0 0

Table 19: Non Performing Loans (NPL)


Movements in the non performing loans (NPL) demonstrate slow but active infection in the

banks financial health for the last two years. Although such infection is insignificant considering

the size of its loan portfolio, unless the bank maintains proper monitoring of the existing

portfolio and remains conscious about its future exposure it may cause a real trouble in future.

(ii) Rescheduled Loan & Rescheduled Policy

The bank seems to follow liberal rescheduling policy to keep the NPL ratio minimum. During

the last one year EXIMs top 20 rescheduled loans amount a total of Tk. 682.28 million which is

7.20% of the banks outstanding loans and advances as on June 30, 2003. out of this rescheduled

amount, Tk. 419.02 million is uncovered. This has been done by changing the mode, conversion

of non-funded loan to force term loans and enhancement of repayment period. Major portion of

these loans come from a few RMG manufacturers whose Back-to-Back LC and pre-shipment

finance liability forcedly converted to uncovered term loan.

(iii) Loan Loss Reserve and Policy

EXIM keeps provisions for its loans and advances as prescribed by the central bank. The

bank, with its existing provisioning policy, keeps reserve for only what is required. Since it is not

keeping any access reserves in good times, it may fall in trouble in bad times if it has to maintain

a significant portion of fund as reserve for nonperforming loans and advances in future.


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(iv) Sectoral Exposure of Loans

EXIMs funded exposure was highest in trade finance followed by working capital

finance with 45.91% and 17% respectively as on EFY 2002. Of its total exposure EXIM is more

concentrated in export finance for garments products followed by import trade financing. The

banks exposure to export trade finance for garments products was Tk. 4.54 billion forming

32.23% of its total exposure (Tk. 14.09 billion) as on June 30, 2002. For EFY 2001 and 2002 this

exposure was 30.83% and 31.40% respectively reflecting a rising trend of concentration. Such a

high exposure to a single sector reveals the level of concentration risk for the bank where the

local garments industry is struggling to survive in the international market. In case of term

financing only, as on the end of 1H 2003, highest exposure goes again to the garments industry

(40.61%) followed by transport industry (12.10%). Leasing companies received 10.11% of the

banks total term financing. Import trade finance constitutes 24.03% of the banks total exposure

(both funded and non-funded) which is 26.73% and 24.02% during EFY 2002 and 2001

respectively.

(v) Large Loan Exposure and Directors Loan

EXIMs top 10 and top 20 term loans amounted Tk. 711.50 million and Tk. 1,140,.20

million respectively as on June 30, 2003 which are 7.51% and 12.03% respectively of its total

funded exposure. At present directors loan is nil as per the document submitted by EXIM.

(vi) Risk-Weighted Assets (RWA)

Risk-Weighted Assets (RWA) is calculated as per the Bangladesh Bank Circular, which

requires 100% weight to be assigned to all loans and advances to the private sector. The RWA


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amounted to Tk. 8181.38 million (as on June 2003) including off balance sheet exposure and this

amount is in increasing trend keeping pace with the growth of its loans and advances.

(vii) Off Balance Sheet Exposure

As on June 2003, total contingent liabilities accounts for 29.78% of total footing (assets

with contra), and 42% of total assets, 46% of the banks contingent are made up of irrevocable

commitments to extended credits. Letter of Guarantee contributed 6% of EXIMs total off-

balance sheet assets. In terms of risk weighting, Off-Balance Sheet (OBS) assets reportedly

formed 2.98% of the banks total risk-weighted assets as at December 2001. as

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