Introduction

BRAC Bank Limited, a scheduled commercial Bank, commenced its business

operation in Dhaka, Bangladesh on 4 July 2001. The Bank is mainly owned by
the largest NGO in Bangladesh – BRAC. The Bank has positioned itself as a
new generation Bank with a focus to meet diverse financial needs of a
growing and developing economy. The Bank has embarked with an
acknowledged policy to promote broad based participation in the Bangladesh
economy through the provision of high quality banking service based on
latest information technology. The Bank will ensure this by increasing access
to economic opportunities for all individuals and businesses in Bangladesh
with a special focus on currently underserved enterprises and households
across the rural-urban spectrum. They believe that increasing the ability of
underserved individuals and enterprises to build their asset base and access
market opportunities will increase the economic well being for all
Bangladeshis.

BRAC Bank Limited, as a scheduled commercial bank established under the

Banking Company Act, 1991 and incorporated as a public company limited
by shares on May 20, 1999 under the Companies Act 1994 in Bangladesh.
The banks has started its operation on 4th of July 2001 with a vision to be
the market leader through providing all kinds of banking services suitable to
the dynamic demands of both business and individual in the competitive
market.

These guidelines will help us to achieve ‘BRAC’ Bank guest experience

standards-

• Bold – BSSO will be BOLD on behalf of their guests and colleagues.

They will be the first to greet, first to listen, first to make suggestions,
first to satisfy even the unexpressed needs and to bid a fond farewell.

• Reliable – BSSO will take full ownership in serving their guests to their
complete satisfaction.

• Appealing – They will ensure that all guest touch points are appealing
and inviting.

1
 • Consistent – It is also necessary to ensure that guest experience
quality is consistent in all aspects across all guest service points all the
time.

The Bank operates under a “double bottom line” agenda where profit and
social responsibility go hand in hand as it strives towards a poverty-free,
enlightened Bangladesh. A fully operational Commercial Bank, BRAC Bank
focuses on pursuing unexplored market niches in the Small and Medium
Enterprise Business, which until now has remained largely untapped within
the country. The management of the Bank believes that this sector of the
economy can contribute the most to the rapid generation of employment in
Bangladesh.

Corporate Information

Inauguration of banking operation July 4, 2004

First SME unit office January 1, 2002
Signing with Shore Cap as investor December 29,
2003
Signing with IFC as investor May 8, 2004
First ATM installed April 3, 2005
Preferential share issued January 31, 2006
Signing with infosys and 3i infotech changing August 1, 2006
bank’s IT base
24×7 phone banking opening September 9,
2006
Listing with CSE January 24, 2007
Listing with DSE January 28, 2007
Commencement of share trading in DSE & CSE January 31, 2007
Credit Card launching February 6, 2007
Introduced Probasi Banking April 14, 2007
Launching of Travel Rated Service (TRS) November 01,
2007
Launching of Omnibus with 12 member banks November 20,
2007
Source: Annual Report of BRAC Bank Limited

Corporate Vision
2
The vision of BRAC Bank is to be a unique organization in Bangladesh. It will
be a knowledge-based organization where the BRAC Bank professionals will
learn continuously from their customers and colleagues worldwide to add
value. They will work as a team, stretch themselves, innovate and break
barriers to serve customers and create customer loyalty through a value
chain of responsive and professional service delivery.

Continuous improvement, problem solution, excellence in service, business

prudence, efficiency and adding value will be the operative words of the
organization. BRAC Bank will serve its customers with respect and will work
very hard to instill a strong customer service culture throughout the bank. It
will treat its employees with dignity and will build a company of highly
qualified professionals who have integrity and believe in the Bank’s vision
and who are committed to its success. BRAC Bank will be a socially
responsible institution that will not lend to businesses that have a
detrimental impact on the environment and people.

Their corporate vision is to build a profitable and socially responsible

financial institution focused on Markets and Business with growth potential,
thereby assisting BRAC and stakeholders build a “just, enlightened, healthy,
democratic and poverty free Bangladesh 8.

Corporate Mission

Corporate mission of BRAC bank is as follows,

• Sustained growth in ‘small & Medium Enterprise’ sector

• Continuous low cost deposit growth with controlled growth in Retained
Assets
• Corporate Assets to be funded through self-liability mobilization
• Growth in Assets through Syndications and investment in faster
growing sectors
• Continuous endeavor to increase fee based income
• Keep Debt Charges at 2% to maintain a steady profitable growth
• Achieve efficient synergies between the bank’s Branches, SME Unit
Offices and BRAC field offices for delivery of Remittance and Bank’s
other products
• Manage various lines of business in a fully controlled environment with
no compromise on service quality
• Keep a diverse, far flung team fully motivated and driven towards
materializing the bank’s vision into reality.

3
Corporate Values

Corporate mission of BRAC bank is as follows,

• Value the fact that BRAC Bank are a member of the BRAC family
• Creating an honest, open and enabling environment
• Have a strong customer focus and build relationships based on
integrity, superior service and mutual benefit
• Strive for profit & sound growth
• Work as a team to serve the best interest of the owners
• Relentless in pursuit of business innovation and improvement
• Value and respect people and make decisions based on merit
• Base recognition and reward on performance
• Responsible, trustworthy and law-abiding in all that BRAC Bank does
do

Goal

BRAC Bank will be the absolute market leader in the number of loans given
to small and medium sized enterprises through out Bangladesh. It will be a
world-class organization in terms of service quality and establishing
relationships that help its customers to develop and grow successfully. It will
be the Bank of choice both for its employees and its customers, the model
bank in this part of the world.

BRAC Bank believes that the pursuit of profit and development goals are
mutually reinforcing and thus it will increase the ability of under-served
individuals and enterprises to build their asset base and will enable them to
access market opportunities. Thus this endeavor will increase the economic
well being for all Bangladeshis and at the same time will contribute towards
the profitability of the bank. Its long term strategy is to go where the market
is.

Objectives of the Bank

The objective of BRAC Bank Limited is specific and targeted to its vision and
to position itself in the mindset of the people as a bank with difference. The
objective of BRAC Bank Limited is as follows:

• Building a strong customer focus and relationship based on integrity,

superior service.

4
 • To creating an honest, open and enabling environment
• To value and respect people and make decisions based on merit
• To strive for profit & sound growth
• To value the fact that they are the members of the BRAC family –
committed to the creation of employment opportunities across
Bangladesh.
• To work as a team to serve the best interest of the owners
• To relentless in pursuit of business innovation and improvement
• To base recognition and reward on performance
• To responsible, trustworthy and law-abiding in all that they do
• To mobilize the savings and channeling it out as loan or advance as the
company approve
• To establish, maintain, carry on, transact and undertake all kinds of
investment and financial business including underwriting, managing
and distributing the issue of stocks, debentures, and other securities
• To finance the international trade both in import and export
• To develop the standard of living of the limited income group by
providing Consumer Credit
• To finance the industry, trade and commerce in both the conventional
way and by offering customer friendly credit service
• To encourage the new entrepreneurs for investment and thus to
develop the country’s industry sector and contribute to the economic
development

Slogan

The slogan of BRAC Bank is “Astha Obichol”. These two words are Bengali
words that denote enormous trust on the organization.

Logo

The logo of BRAC Bank is very indicative in conformance with the goal of the
organization. This logo has a square shape which means solid and strong.
The golden color indicated the “Sonar Bangla”, the rising line denotes the
growth of BRAC Bank, and blue is the beautiful sky where the sun is shining
brightly.

Bank’s Culture

BRAC Bank has adopted trust as a corporate value which is the acronym for
team work, respect for all people, unquestionable integrity, excellence in

5
everything BRAC Bank of SME do, Sense of urgency in getting things done
and total commitment.

All employees are expected to conduct themselves in accordance with the

rules, regulation and norms of the bank.

Nature of the Business

BRAC Bank Ltd. put forward all banking needs for its customers which
comprises deposit banking, investment, export and import financing, inland
and international remittance facilities, online banking services, etc.

Membership

• Bangladesh Association of Banks

• The Institute of Bankers, Bangladesh
• International Chamber of Commerce
• Metropolitan Chamber of Commerce and Industry
• American Chamber of Commerce in Bangladesh
• Bangladesh Employers’ Association

CRAB Ratings

Credit Rating Agency of Bangladesh (CRAB) Limited has retained ‘AA2’

(Pronounced Double A Two) rating in Long Term and ‘ST-2’ rating in the
Short Term of BRAC Bank Limited in view of the performance of the Bank.

Commercial Banks rated ‘AA2’ rated in the long term belong to ‘Extremely
Strong Capacity & Very High Quality cohort. Banks rated ‘AA2’ have very
strong capacity to meet their financial commitments. ‘AA2’ is judged to be of
high quality and is subject to very low credit risk.

Commercial Banks rated ‘ST–2’ in the short term are considered to have
strong capacity for timely repayment. Commercial Banks rated in this
category are characterized with commendable position in terms of liquidity,
internal fund generation, and access to alternative sources of funds.

Shareholding Position

Sl. Name No. of Amount % of

6
No Shares (Taka) Share
1. BRAC 3,808,68 380,868,00 31.74
0 0
2. Mr. Fazle Hasan Abed 120 12,000 0.001
3. Mr. Syed Humayun Kabir 120 12,000 0.001
4. Mr. A. S. Mahmud 120 12,000 0.001
5. Mr. Faruq A. Chowdhury 120 12,000 0.001
6. Mr. Dr. Salehuddin Ahmed 120 12,000 0.001
7. Mr. Md. Aminul Alam 120 12,000 0.001
8. Shore Cap International Ltd. 1,050,84 105,084,00 8.75
0 0
9. International Finance 1,139,76 113,976,00 9.50
Corporation 0 0
10. Mutual Fund 289,980 28,998,000 2.42
11. Non-resident Bangladeshi 56,885 5,688,500 0.47
12. Institutions & General Public 5,653,13 565,313,50 47.11
5 0
Grand Total 12,000,0 1,200,000 100.00
00 ,000

Different Departments of BRAC Bank Ltd

1. Human Resources Department

2. Financial Administration Department
3. Asset Operations Department
4. Credit Division
5. SME Division
6. Internal Control & Compliance Department
7. Marketing & Product Development
8. Impaired Asset Management
9. Remittance Operation Department
10. Treasury Front
11. Treasury Back
12. General Infrastructure Service
13. Information Technology Department
14. Customer Service Delivery
15. Cards Division
16. Call Center
17. Cash Management
18. Secured Remittance department
19. Women Entrepreneur Cell
20. Payment Service

7
Monetary & Financial Resources
Like any other financial intermediaries, BRAC Bank Limited is no exception in
performing its core function

Mobilization of fund
The main sources of fund for the Bank are:
1. Deposit, and
2. Borrowing

1. Deposit
Deposit is the mainstay of the Bank's sources of funds. Following usual
practices, it collects deposit through:
 Current Deposit
 Savings Deposit
 Term Deposit

2. Borrowing
Apart from deposit, BRAC Bank Limited received funds from:
 Bangladesh Bank
 Asian Development Bank (ADB)
 KFW (kreditanstalt fur Wieder-aufbau Credit Institution for
Reconstruction), a German development bank. All of these funding
sources are for relatively longer period. Receiving the credit lines from
ADB and KfW has been a recognizing of the Bank's highly satisfactory
performance.
Function:

The Bank Offers:

a. Term loans to industries especially to small-scale enterprises.

b. Full-fledged commercial banking service including collection of deposit,

short-term trade finance, working capital finance in processing and
manufacturing units and financing and facilitating international trade.

c. Technical support to Small Scale Industries (SSls) in order to enable them

to run their enterprises successfully.

d. Micro credit to the urban poor through linkage with Non- Government
Organizations (NGOs) with a view to facilitating their access to the formal
financial market for the mobilization of resources.

8
In order to perform the above tasks, BASIC Bank works closely with its
clients, the regulatory authorities, the shareholders (GOB), banks and other
financial institutions.

Credit Policy of BBL

In order to minimize credit risk, BBL has formulated a comprehensive credit

policy according to Bangladesh Bank Core Risk Management guidelines.
Credit policy of the Bank provided for the separation of the credit approval
function from business, marketing and loan administration function. Credit
policy of BBL recommended through credit assessment and risk grading of
all clients at the time of approval and portfolio review. Credit policy also
provides the guidelines of required information for credit assessment,
marketing strategy, approval process, loan monitoring, early alert process,
credit recovery, NPL account monitoring, NPL provisioning and write off
policy, etc. The board of directors reviews the credit policy of the bank
annually.

Credit Risk Management

Credit risk is the risk to an institution’s earnings and capital when an
obligator or customer fails to meet the terms of any contract or otherwise
fails to perform as agreed. It is one of the major risks faced by the bank.

Considering the key elements of Credit risk, the bank has segregated duties
of the officers /executives involved in credit related activities. Separate
division for Corporate, SME and Retail has been formed which are entrusted
with the duties of maintaining effective relationship with the customer,
marketing of credit products, exploring new business opportunities etc. For
transparency in the operations during the entire credit period i. Credit
Approval Committee, ii. Loan Administration Department, iii. Recovery Unit
and iv. Impaired Asset Management has been set up.
In addition to the above Sales Teams of the above-mentioned business units
book the customers; the Credit Division does through assessment before
approving the credit facility. The risk assessment included borrower risk
analysis, financial analysis, industry analysis, and historical performance of
the customer. Loan Administration Department ensures compliance with all
legal formalities, completion of all documentation security of the proposed
credit facility and finally disburses the amount. The Sales team reports to
the DMD through their line; the Credit division reports to Managing Director,
while the Loan Administration reports to the Chief Operating Officer. The
above arrangement has not only ensured segregation of duties and
accountability but also helps minimize the risk of compromise with quality of
the credit portfolio.

9
During the year 2010, credit risk management has taken few initiatives to
achieve better quality portfolio,

 To support SME credit, CRM has started to establish Regional

Credit Risk Management centers national wide to maintaining
quality, through which the bank can cover 60% of the business in
terms of verification, assessment and approval of SME loans.
 A new wing called “Special Asset Management (SAM) and Credit
Inspection- Wholesale Banking and Medium Enterprise” has been
included in the fleet of credit risk management.
 To enrich the collection and monitoring, CRM has introduced
software called Collection and Recovery Management Application
(CARMA).
 A new SME collection team under CRM has been launched to look
after all SME portfolios of Dhaka and Chittagong metropolitan
area.

Business Divisions of BRAC Bank Ltd

It has four major business divisions:

1. Corporate Banking Division

2. Retail Banking Division
3. Small & Medium Enterprise Division
4. Foreign Trade and Treasury Division

Divisions and Services of BRAC Bank Limited

1. Corporate Banking Division

Being a major business unit of the bank, corporate banking division has been
playing a significant role to achieve the overall objective of the bank. Since
the starting, the division is continuously striving to provide more customer
focused products for its valued clients. In this process, the division has
segmented itself into various units which cater the associated customer
segment. The year 2010 will be marked as a milestone for the corporate
banking division as it has finance several large projects in this year.
Corporate banking helps its customers to fulfill their objectives by carefully
listening and analyzing their ideas, providing necessary expertise and
composite products. The business unit operates through the following five
major wings:

• Structured Finance

10
 • Local Corporate Unit
• Medium Enterprise Unit
• Cash Management and Corporate Liabilities

Last year corporate banking enjoyed outstanding growth of 67% in advances

while cah management registered 11% growth in deposits due to primary
focus on mobilizing CASA( current and savings account) and operating
accounts as opposed to term deposits.

Corporate Banking Services

 Corporate Loan Products

 Overdraft

 Term Loan

 Lease Finance

 Loan against Trust Receipt (LATR)

 Work Order Finance

 Medium Enterprise

 Trade Finance

 Letter of Credit (LC)/ Letter of Guarantee (LG)

11
2. Retail Banking Division

Retail Banking Unit ha further strengthened its position as a major channel of

business by stretching its horizon with its unique offer of personal banking
across the country. This unit takes foremost funding responsibility of the
bank and is committed to offer multifarious services to entire customer base
of the bank through branches, alternative delivery channels, premier
banking services, and literally taking retail banking products to doorsteps
through direct sales force.

A phenomenal growth in terms of new customers was registered by retail

team and graphical comparison of three years is given below:

Retail Banking Services

The retail, corporate, and foreign division of BRAC Bank Ltd. Offers different
types of services to its values customers which are discussed below:

Depository Services:

BRAC Bank offers many types of deposit products to its customers which are
as follows:

 Fixed Deposit:
Opening Requirements
• A Current Account or Savings Account

General Features
• A term deposit with a guaranteed monthly return on investment
• Competitive interest rates
• Early encashment flexibility
• Secured Loan and/or Secured Overdraft eligibility

 Interest First Fixed Deposit

Here depositors don’t have to wait till maturity to receive interest on fixed
Deposit. BRAC Bank Interest First Fixed Deposit lets the depositor draw the
interest instantly at the time of deposit. This is a deposit scheme where the
client receives interest in advance.

Features

12
 • Instant interest on fixed Deposit
• Interest reinvestment opportunity
• Attractive rate of return
• Loan facility against the IFFD

 Abiram Account

BRAC Bank ‘Abiram’ Account is a special type of Fixed Deposit scheme,

which offers the flexibility & comfort of having a guaranteed monthly return
on investment.

Features

• Monthly interest on deposit

• Attractive rate of return
• 95% loan against deposit

 EZee Account

In EZee Account BRAC Bank offers a non-cheque interest bearing account for
small savers who are in frequent need of transaction. Depositors get an ATM
card to operate account round the clock.

Features

• 24 hour access to ATMs and POS

• Interest on daily balance
• No minimum balance
• No ledger fees

DPS
BRAC Bank’s Deposit Premium Scheme (DPS) is a savings plan that adds
value to hard earned money.
Features

• Monthly installments can be as low as Tk. 500 or any multiples of it

• Choose any day as installment date
• Receive a Savings a/c with a personalized cheque book
• On-line banking facilities

Monthly Maturity amount after completion of all

Installment regular

13
Amount (BDT.) installments payment*
4 Years 7 Years 11 Years 14 Years
500.00 28,667.00 58,650.0 116,603.0 179,550.00
0 0
1000.00 57,334.00 117,300. 233,207.0 359,101.00
00 0

Savings Account

A regular savings account offers interests on deposit amount.

Features

• Cash withdrawal and deposit of 5 lac and above need clarification

• No forfeiture rules or hidden costs
• No requirement for notices to be given before making a withdrawal
• Use the network of ATMs for easy cash withdrawal
• Get mini balance statements from the ATM whenever needed
• Interest rate of 5.5% on average monthly balance

Short-term Deposit

This is a deposit scheme to give returns on savings.

Features

• Minimum balance required is Tk. 100,000

• Interest paid twice a year but calculated monthly if balance is > Tk.
100,000
• Secured returns.

Current Account

BRAC Bank’s Current Account is a normal checking account, gives the option
to deposit and withdraw money for day-to-day needs.

Features

• ATM card for easy cash withdrawal

• Withdraw money from all ATMS
• Deposit cheques at any of the branches and get the fund immediately
• Use online banking facility for free
• Easy access to other facilities

14
Salary Account

BRAC Bank Salary Account is a payroll account for Employers and

Employees. As an organization, anyone can opt for the Salary Account to
enable easy disbursements of salary & benefits.

Eligibility

The organization needs to have a minimum of 10 employees and a payout of

Tk. 1 lac per month and an average salary per employee of Tk. 10,000 per
month.

Features

• Zero balance
• Non-checking account
• ATM debit card
• Savings Interest

3. Small & Medium Enterprise Division

The SME program of BRAC is a venture of BRAC Bank. BRAC bank was set up
with the growing need for capital mobilization and the need for formal
contracts for a wider spectrum of clients of the country. When it came to
SME financing, instead of approaching the problem by scaling down its
regular operations, a separate program designed specially for SME financing
was launched by BRAC Bank in 2002. BRAC Bank’s effort is noted in this
regard for its complete focus on the credit needs of the small and medium
enterprises. Since the initiation of SME operations by BRAC Bank, it has
become the Bank’s largest and most profitable venture. As of December
2004, the SME division accounted for two third of the Bank’s profits. BRAC
has served 320000 entrepreneurs with SME loans valued at BDT 144330
millions through its 424 SME unit offices. BDT 37400 million assets
disbursement was supplemented by BDT 8970million deposits.
The unique feature of BRAC Bank is that it is the only bank that approaches
prospective clients, while other banks wait for them to apply for loans when
required. SME units of BRAC Bank are located in all districts of the country.
Each unit has two to five Customer Relations Officers (CROs). The role of
CROs is instrumental in not only selecting and approaching clients, but also
in maintaining regular interaction with each client, monitoring the use of the
loan and ensuring regular repayment.

15
4. Foreign Trade and Treasury Division

BRAC Bank’s Foreign Trade and Treasury Division are well equipped with
modern telecommunication infrastructure facilities like: SWIFT, Reuters,
Bloomberg, Internet, Voice Recorder, etc. Treasury manages the Bank’s
liquidity and its associated risk. It also manages foreign exchange
transaction related risk exposure in a profitable manner.

 BRAC bank received approximately 6% of total inward remittance to

Bangladesh in the year 2010.
 The bank secured 4th position among all the private commercial banks
and 7th among all the banks in Bangladesh in terms of bringing inward
remittance with the volume of 557 Million and over 1.5 million
transactions.
 Accrued 75+1% shares of Saajanan Worldwide Money Transfer Ltd in
United Kingdom.

16
Financial Review

During the financial year 2010, the banking industry faced far greater
challenges. BRAC bank has been well ahead of majority of the bank. It has
remarkable performance in every aspect of banking activities such as
creating firm deposits, advance and profit growth.

Year Earning Net Net Price Dividend

per Asset Profit Earning
share Value After Ratio
Per Tax
Share (mn)
2010 68.17 349.37 1825.02 15.07 10.00, 20%B
2009 64.37 381.62 1325.55 13.88 30%B
2008 61.46 343.28 973.45 17.52 30%B

2007 54.95 256.55 618.34 29.33 10%B, 1R:5

2006 63.31 216.72 334.30 8.40 20%B
2005 38.54 156.58 192.68 n/a
2004 23.16 118.04 99.30 n/a
2003 12.09 97.75 30.28 n/a
2002 -15.15 84.25 -37.86 n/a

Financial Performance

BRAC bank had passed another successful year despite the unreceptive
market condition. The bank had operating profit of BDT 4969 million which is
34% more than previous year.

17
Operating Result

BRAC had net profit after tax in 2010 was BDT 1664 million- an increase of
28% over last year. Return on equity was 18.95% and EPS was BDT 60.39.

Interest income of the bank has increased by 14% in 2010 and is consistent
with the increase of loans and advances growth by 31%. Interesting expense

18
has decreased by 5% in 2010, as liabilities were reprised at lower rates and
the deposit mix title towards low cost funds.

Net interest income in 2010

was BDT 5094 million which increased by BDT 1661 million from last year.

Non funded income grew this year by 4%. The bank successfully increased
its non funded income and reduced its burden ratio over this year.

On the other hand operating expense is increased this year by 29% and this
impact by staff salary and allowances increased by 26% to support
increasing business volume and services. Number of stuff was increased by
21% over last year whereas the fund under management (FUM) has
increased by 24%.

19
Total asset of the bank rose to BDT 119150 million in 2010 from BDT 95127
million in 2009. The figure shows a significant increase in total assets
documented in loans and advances, investments, fixed assets maintains by
bank. Total asset situation of the bank in last few years is given below

Year Total Asset % Change

2006 30,012 77.84%
2007 46,383 54.55%
2008 72442 56.18%
2009 95127 31.31%
2010 119150 25.25%

Loans and advances increased by BDT 20152 million or 31% in 2010. This is
result of continued growth in the lending business and focus on customer
profitable growth.

SME sector the main concentration area of the bank, comprises 50% of total
loans and advances. The major portfolio of BRAC bank belongs to the
commercial sector.

20
The banks investments in 2010 was mostly in government securities, which
stood at BDT 9668 million as on December 31st 2010 as against BDT 10258
million at the end of the previous year. To comfortably maintain CRR, SLR
and use the surplus fund in the cost effective way. Out of total investment
75% concentrated in government securities.

Customer deposits of the bank grew by 17% in 2010. The bank ended the
year with total customer deposits of BDT 88158 million compared to 75220
million in the year 2009. Almost 39% of the total deposits are in the form of
fixed deposits whereas only 18% and 23% are in the form of current and
savings deposits.

Shareholders equity

The shareholders equity has increased by 15% over the previous year. Paid
up capital of the bank has been raised from BDT 2059 million to BDT 2677

21
million, trough issuance of bonus share out of retained earning from 2009.
This year the banks consolidated equity is BDT 10551 million and banks
equity is BDT 9412 million.

Shareholding Position

The shareholding position of the bank as on December 31, 2010 is as follows

The shareholding of BRAC has increased to 44% due to release of shares by

ShoreCap International Ltd. Shareholding by the institution and general
public has also increased up to level of 46%.

Sources and Utilization of Funds

The main source of fund is customer deposits, which is composed of 74% of

total funds. The banks major funds are utilized in loans, advances and

22
investments, comprising around 71% and 11% respectively of total funds
available to the bank.

ROA and ROE

Return on assets (ROA) this year stood at 1.55%, recording a slight from
2009 (1.56%). Return on equity (ROE) stood at 18.95%, against 19.19% in
the year 2009.

Cost to Income Ratio

In the year 2010, Cost to Income Ratio has decreased from 48.82% to
47.92% due to a greater income growth than that of the cost.

Maintaining Capital Adequacy

Capital Adequacy ratio is the measure of the financial strength and

sustainability of the bank. CAR determines the capacity in terms of meeting
the time liabilities and other risk such as credit risk, market risk etc. banks
capital is the cushion for the potential future loses that protects the banks
deposits and other lenders. In this regard the Bangladesh Bank uses CAR as
the mechanism to protect depositors and confidence of the banking system.

The bank maintained adequate capital of 12.07% compared to the current

regulatory requirement of 10.00%. In 2010, the bank core capital and total
capital base were7.43% and 12.07% respectively

Capital Adequacy Ratio and Total Capital in last five years:

Capital 2006 2007 2008 2009 2010

composition
Capital-Core* 1967 2572 4819 6074 7392
Capital- 529 1220 1298 2216 4619
Supplementar
y*
Total Capital 2496 3729 6117 8290 12011
Capital 13.53 12.28 12.76 12.45 12.07
Adequacy
Ratio

* Capital –Core: includes paid up capital, share premium account, statutory

reserve and retained earnings.

23
* Capital –Supplementary: includes general provisions (on unclassified
loans), preference shares, and exchange equalization fund.

Economic Value Addition (EVA)

Economic Value Addition is the measure to calculate the economic value

added by the enterprise to the shareholders. In computing economic value
addition, economic profit and contribution to the government exchequer is
considered.

Market Value Added (MVA)

Market Value Added is the difference between the current market value of a
company and the capital contributed by the investors. Higher MVA is better
for the organization. It indicates that the company created substantial
welfare for the shareholders. The negative MVA means the value of the
management action and investments are less than the value of capital
contributed to the company by the capital market.

24
Economic Profit

Economic profit is a residual measurement which subtracts the cost of

capital from the net operating profit after tax generated in the business. The
bank internal performance measures include economic profit, a calculation
which compares the return on the financial capital invested in the bank by its
immediate sponsors. The bank prices its cost of capital internally and the
difference between that cost and post cost profit attribute to the ordinary
shareholders represents the amount of economic profit generated. Economic
profit is used by the management as one of the measures to decide where to
allocate resources so that it can be more productive.

In EVA terms, the bank created BDT 1605 million in 2010, with a growth of
12%.

Geographical Location-wise Segment Information

The bank initiated to review “Geographical Location-wise Segment

Reporting”. Reported business segments within the geographical territory of
Bangladesh are shown bellow,

25
  Dhaka Division
 Sylhet Division
 Rajshahi Division
 Chittagong Division
 Khulna Division
 Barishal Division
 Rangpur Division

During the year the bank made net operating profit of BDT 4969million. The
segment distribution of net operating profit is shown in following graph,

Loans and advance position of the bank was increased from BDT 64151
million (2009) to BDR 84303 million (2010). The segment position of loans
and advances 2010 is shown bellow:

26
Retirement Benefit to the Employees

Provident Fund
Provident fund benefits are given to the staff of the bank in accordance with
the registered Provident fund rules. The commissioner of Income Tax, Large
Tax Payers Unit, Dhaka has approved the Provident Fund as a recognized
provident fund within the meaning of section 2(52) read with the provisions
of part - B of the First Schedule of Income Tax Ordinance 1984. The
recognition took effect from 1st January 2003. The fund is operated by a
Board of Trustees consisting of 11 (eleven) members of the bank. All
confirmed employees of the bank are contributing 10% of their basic salary
as subscription to the fund. The bank also contributes equal amount of the
employees' contribution to the fund. Interest earned from the investments is
credited to the members' account on half yearly basis. Members are eligible
to get both the contribution after 03 years continuous service from the date
of their membership.

Gratuity
Gratuity fund benefits are given to the staff of the bank in accordance with
the approved Gratuity fund rules. The fund is operated by a Board of
Trustees consisting of 6 (six) members of the bank. Employees are entitled
to gratuity benefit after completion of minimum five years of service in the
Company. The gratuity is calculated on the basis of last basic pay and is
payable at the rate of one month's basic pay for every completed year of
service. We have applied for recognition of the fund and the approval
procedure is under process.

Revenue Recognition

Interest Income
In terms of provision of Bangladesh Accounting Standard (BAS -18) on
revenue and disclosures in the financial statements of the Bank, the
interest receivable is recognized on accrual basis. Interest in loans and
advances ceases to be taken into income when such advances are
classified, kept in interest suspense account. Interest on classified
advances is accounted for on a receipt basis.

Fees & Commission Income

Fees & commission income arises on services provided by the Bank
recognized on a cash basis. Commission charged to customers on letters of
credit and letter of guarantee are credited to income at the time of
effecting the transactions.

Dividend income on Shares

27
 Dividend income from shares is recognized when that right to receive the
payment is established.

Interest Paid and other expenses

In terms of provision of the Bangladesh Accounting Standard (BAS -1)
Presentation of Financial Statements, the interest paid and other expenses
are recognized on accrual basis.

SWOT Analysis

Strengths

• BRAC bank has already gained a positive image in the mind of the
customers. And its strong corporate image helped it to gain the trust to
the depositors.
• BRAC Bank has probably the best customer care service among the
domestic competitors operating in Bangladesh.
• It has a very good combination of shareholders who are very affluent
and has significant importance in the society.
• BRAC Bank has an efficient management team who are heartily
working for the achievement of the ultimate objective of this bank.
• It has an efficient Human Resource who are efficient who are well
trained and motivated thus they can manage their assigned activities
and responsibility.
• From the technological perspective BRAC Bank is one of the leading
institutions to adopt new innovations quicker than others.
• BRAC Bank has already established its branches in many places all
over the country.
• It has a friendly work environment where the employees can give their
full effort with motivation which eventually results in an .efficient team
effort.
• The management system is decentralized and BRAC Bank intends to
reduce the bureaucracy from its system.
• BRAC Bank can maintain a favorable even high profit margin.
• BRAC Bank is financially very sound organization.

Weaknesses

28
 • Although SME loan is a very significant castor of BRAC Bank but people
are less notified about the fact and they are not much familiar with all
the SME packages that this bank offers.
• They do not focus the retail banking and corporate banking sector as
like as SME sector thus its retail and corporate banking is getting less
emphasis.
• Although the ATM posts of BRAC Bank is increasing day by day but still
some of its competitors are having much more ATM booths which
somehow hamper its image.
• Although its profitability is getting higher but its operating cost per
employee is increasing.

Opportunities

• The market for commercial banks is widening day by day. Because

people’s trust over the private banks is getting stronger.
• There are many technological developments happening around the
world and if they can adopt those technologies before its competitors it
can enjoy the benefit over the time.
• Still there is a good prospect and widening market for SME loan which
will provide BRAC Bank a new arena.

Threats

• The upcoming political situation if turns into a unstable economic

condition that can be considered as a major threat as a hinder for
normal operation.
• Competitive rivalry among the local banks is increasing day by day.
Thus this threat for this bank to survive in its current position.
• Threat of new entrants is also a considerable factor. As an emerging
sector new companies may come up with their distinctive
competencies and can make obstacles for BRAC Bank to grow.

Problems

• There are insufficient service stations for withdrawing and depositing

money in the branch offices and for that reason often long queues are
made thus increase the waiting time for the customers and eventually
results in customer dissatisfaction.

29
 • All the money available in the bank are not always well utilized
sometimes they remain as idle money.
• A serious problem is occurring for the last few months that the ATM
booths often becomes unusable mostly because of problems in ATM
machines
• Often this is found that there is no money in the ATM machines but
customers are waiting for withdrawing money.
• They signify on their internet banking system but this has lots of
problems and thus this is not convenient for the customers to use.
• Employees in BRAC Bank get lower salary for which they sometimes
lose the motivation.
• Except few branch offices most of the branch offices have insufficient
space.
• Although the number of BRAC Bank booth is increasing but that is not
adequate in comparison of its major competitors.
• The information given about the Bank’s features and many other
things in the website is backdated.

Recommendations

• In the branches of BBL there should be more number of service

stations for withdrawing and depositing money so that it reduces the
customer waiting time.
• There should be more efficient capital management and investment
analysts appointed so that idle money does not remain in the bank.
• They should frequently keep their conscious observation to monitor
that the ATM machines in all the booths are usable and adequate cash
is there.
• They should increase their ATM booths substantially in order to
compete with its competitors.
• They should update the information in the website in a regular basis.
• BBL should increase the space in the branch offices as their client size
is increasing day by day and also introduce new branches in various
places of the country for expansion.
• The managers should be sent to different training programs on a
regular basis to improve their knowledge base which would help them
to improve their efficiency.
• Employees of BRAC Bank should be provided a better salary package
in order to keep them otherwise they may switch to another job for
higher salary.
• Management should be more decentralized to provide faster services
to the clients.

30
 • In order to remain as the market leading company they should
emphasize much on retain the existing customer base and also should
try to attract new customers.
• In the loan approval procedure the evaluation of creditworthiness of
the clients should be more authoritarian in order to reduce the chance
of defaulter.
• SME loan of BRAC Bank has already gained popularity to the business
people but there is an objection about the interest rate where the bank
should be more aware and also try to decrease the interest rate.
Because of higher rate of interest defaulter rate may increase which
would ultimately affect the profitability of the bank.

Conclusion

BRAC Bank Limited has gained a positive image in the mind of the people in
Bangladesh and this is reflected in the growth and performance of the bank
in the last few years. BRAC Bank’s steady rise to the top as the fastest
growing bank in the country intends to lead the bank towards the
achievement of its ultimate objectives and goals in compliance with its
vision..

This bank has a strong financial base and huge assets to meet up its
liabilities which makes this organization financially sound and solvent. The
management of this bank is outfitted with expert and efficient bankers and
managers who delicately serve the bank. They work for the betterment of
the bank as a team. According to my study the performance of this bank is
noticeable. In this study to evaluate the financial performance of this bank
various financial parameters were considered and BRAC Bank was found as a
fast growing bank and simultaneously performing well in almost all the
areas.

To keep with this pace of growth and improvement they now should more
vigilant on what their customers want and should be more vigilant while
giving loans to the clients in order to reduce the defaulter rate.

References

Websites

1. http://siteresources.worldbank.org/EXTFINSEC/Resources/loc_chap2.pdf

2. http://en.wikipedia.org/wiki/Banking

31
3. http://www.photius.com/countries/bangladesh/economy

4. http://en.wikipedia.org/wiki/List_of_Banks_in_Bangladesh

5. http://en.wikipedia.org/wiki/Bangladesh_Bank

6. http://www.BRACbank.com/php/include_submenu.php?pg=1

7. http://www.termpaperslab.com/term-papers/117773.html

8. http://www.BRACbank.com/php/include_gen.php?pg=7

9. http://www.federalreserve.gov/pubs/feds/1998/199832/199832pap.pdf

Text

BRAC Bank Limited, Annual Report 2008-2010

32