CHAPTER-1:

INTRODUCTION

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1.1 Introduction:
Financial institutions are investment intermediaries linking the savers and users of fund.
These intermediaries are interposed between the ultimate borrowers and lenders
permitting them efficient transfer of funds. Individuals having surplus funds can lend
them for reasonable return to entrepreneurs who need funds to take the advantage of
economically and financially viable investment opportunities. The existence of financial
institutions facilitates such exchange of resources. As a result, both the borrowers and
lenders are better off than they would have been without financial institutions and market
intermediaries. Thus, these financial institutions, such as banks, have a positive role in
financing and investment which is a multidimensional process involving the complexity
of many interrelated and interdependent factors of diversified nature. It is difficult to
assess the contribution of each factor independently.

The key to successful banking lays in the ability of balancing many activities
simultaneously. The bank must maintain a healthy growth rate, while at the same time it
must take action to minimize the risks it faces. The bank must also maintain enough cash
on hand to meet obligations. All of these are related to sound performance of a bank.
Evaluating Bank Performance, examines the basic risk and return features of commercial
banks. The financial performance evaluation demonstrates the strengths and weaknesses
of bank performance over time. First Security Islami Bank Ltd. has a responsibility to
ensure efficient and effective banking operation in a sound manner.

1.2Objectives of the Term paper.

Analysis of the performance of any institution is of crucial importance. Banking business
provides important service to the economy. Here, we will make an attempt to evaluate the
performance of First Security Islamic Bank Ltd. The financial performance of a bank can
be evaluated from different perspectives. However, the specific objectives of the study
will be:
To focus on the theoretical developments of some key areas e.g.,
Asset/Liability Management, Liquidity Management, Credit Risk Management.
To analyze Uniform Bank Performance Report (UBPR) for evaluating
bank performance.
To evaluate the performance of First Security Islami Bank Ltd. by UBPR.
To identify the problems and to suggest remedial measures thereto.

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1.3. Methodology:
The data collection method of study consists of both of primary and secondary sources,
but majority of the information was collected from secondary sources.

Primary sources
Observation
Oral & information with officers and employees of the FSIBL
Face to face conversation

Secondary Sources
Annual and other periodical reports of FSIBL
Various manuals
Service rules
Many circular published by FSIBL

1.4 Limitations:
On the way of preparing this report, I have faced the following problems that may be
terms as the limitations of the study:
I) The main constraint is limitation of time. Due to the time limit, the scope
and dimension of the study has been curtailed.
II) Some departments are strictly prohibited to disclose data for use.

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 Chapter-2:
Conceptual Issue

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Profile of the Organization (FSIBL)

2.1 Background of FSIBL

First Security Islami Bank Limited emerged as a new commercial bank to provide
efficient banking services and to contribute socio-economic development of the country.
The bank commenced its operation August 12, 1999, under the company Act 1994 and it
emerged as Islami Bank named First Security Islami Bank Ltd from 01 January,
2013.The bank provides a broad range of financial services to its customers and corporate
clients. The Broad of Directors consists of eminent personalities from the realm of
commerce and industries in the country.
The company philosophy A step ahead in time has been precisely the essence of the
legend of Asian success; the bank has been operating with talented and brilliant
personnel, equipment with modern technology so as to make it most efficient to meet the
challenges of 21st century.

During this short span of time the Bank successful in positioning itself as p progressive
and dynamic financial institution in the country. The bank had been widely acclaimed by
the business commodity from small businesspersons or entrepreneurs to large traders and
industrial conglomerates included the top rated corporate borrowers for providing
innovative financing solutions.
The sponsor and director of the bank are a successful group of prominent local and non-
resident Bangladesh investor who has earned high credential and excellent reputation in
their respective fields of business at home and abroad.

2.2 Feature of FSIBL

There are many reasons behind the better performance of First Security Islami Bank
limited than any other newly established banks:
The inner environment of all branches is well decorated
First Security Islami Bank limited provides attractive interest rate in deposit
scheme, which are the highest among other commercial banks
The bank provide loan to the customers at lower interest rate with easy and
flexible condition than the other do

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 L/C commissions and other charges are relatively low than other banks. The bank
has established correspondent relationship with many foreign banks.
2.3 Mission of FSIBL
First Security Islami Bank Limited aims to become one of the leading banks in
Bangladesh by quality of operations in their banking sector. The bank has some mission
to achieve the organizational goals.
These are listed bellow:
The bank believes in strong capitalization.
It maintains high standard corporate and business ethics.
First Security Islami Bank Limited extends highest quality of services, which
attracts the customers to choose them first.
First Security Islami Bank Limited provides products and services that encourage
savings.
First Security Islami Bank Limiters main business mission is to obtain fine
position in the banking sector of Bangladesh as well as internationally.
It also emphasizes on a reasonable return from its investment to satisfy the
shareholders.

2.4 Objective and Goals of FSIBL

The objectives and the goals of First Security Islami Bank Limited are the following:
Their main objective is to maximize profit, which in turn will maximize wealth.
First Security Islami Bank limited is always ready to maintain the highest quality
of services by banking technology prudence in management and by applying high
standard of business ethics through its established commitment and heritage.
First Security Islami Bank limited is committed to ensure its contribution to
national economy by increasing its profitability through professional and
disciplined growth strategy for its customer and by creating corporate culture in
international banking area.

2.5 General Information of FSIBL

First Security Islami Bank limited was in Bangladesh on 29 August 1999 as a banking
company under Companies Act 1994 to carry on banking business. It obtained permission
from Bangladesh Bank on 22 September 1999 to commence its business. The main motto
of this bank is to provide comparative better and improved modern banking services to its
customers.

Nature of Business

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FSIBL offers services for all banking needs of the customers, which includes deposit
banking, loans and advances, export and import financing, inland international remittance
facilities.

CHPTER-3:
DATA BASE:

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3.1.Primary Data:
Primary data were always known as survey data. These types of data were collected from
bank officials on the basis of a checklist.

3.2. Secondary data:

Secondary data were collected from Annual reports of FSIBL and its website. Relevant
books, Journal Articles were also perused for collecting information. Collected data and
information were analyzed

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 CHAPTER-4:
FINDINGS & RATIO ANALYSIS:

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Fundamental Analysis has a very broad scope. One aspect looks at the factors of a
company. The other general (qualitative) side considers tangible and measurable factors
(quantitative). This means crunching and analyzing numbers from the financial statement.
If used in conjunction with other methods, quantitative analysis can produce excellent
results.

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic
use of ratio to interpret the financial statements so that the strength and weaknesses of a
firm as well as its historical performance and current financial condition can be
determined. The term ratio refers to the numerical or quantitative relationship between
two variables.

With the help of ratio analysis conclusion can be drawn regarding several aspects such as
financial health, profitability and operational efficiency of the undertaking. Ratio points
out the operating efficiency of the firm i.e. whether the management has utilized the
firm's assets correctly, to increase the investor's wealth. It ensures a fair return to its
owners and secures optimum utilization of firms assets.

Ratio analysis helps in inter-firm comparison by providing necessary data. An inter-firm

comparison indicates relative position. It provides the relevant data for the comparison of
the performance of different departments. If comparison shows a variance, the possible
reasons of variations may be identified and if results are negative, the action may be
initiated immediately to bring them in line.

Ratio analysis isnt just comparing different numbers from the balance sheet, income
statement, and cash flow statement. Its comparing the number against previous years,
other companies, the industry, or even the economy in general. Ratios look at the
relationship between individual values and relate them to how a company has performed
in the past, and might perform in the future.

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4.1.Findings of the study:
Findings:
(i) In a developing country like Bangladesh the need for domestic resource is of
special importance. Deposit held by the financial intermediaries constitutes the
major part of domestic financial resources of the country. The other activities of
the bank are chiefly dependent upon the deposits. The higher the amount of
deposits, the better is the position banks in financing investment projects,
especially large-scale projects. The size of deposit (table: 5.2) shows that FSIBLs
growth in deposit is notable over the years indicating a growth rate of 67.47%.

(ii) Investment and advance are vital to finance the projects. An appropriate credit
distribution system and monitoring will ultimately lead to the profit maximization
of banks. It is evident from table: 5.3 that the size of FSIBLs investments and
advances are increasing over the years. It indicates more earning for the bank. It
shows a positive growth rate.

(iii) Profit is the simplest and most convenient yard stick appraising the performance
of the banks as they deal with finance. The survival and sustained growth are
possible when there is a regular flow of profit. Above all, the service value being
intangible profit may be the justifiable banks from the financial aspect. Net profit
figures show the absolute amount of profits. Table: 5.5 show that First Security
Islami Bank Ltd. has a positive growth rate in Net Profit. It also indicates a
positive trend.

(iv) Return on Asset (ROA) shows that the bank has maintained a positive ROA 2009
to 2013. The profitability of the bank gradually increased and attained highest
ROA of 2.11% in 2012. The ROA of 2013 is lower than 2012, this is because of
lower growth in net income compare to asset growth. The trend of ROA is
positive and the compound growth rate shows that every 100 taka utilized results a
positive growth of ROA of Tk. 0.5612.

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4.2 Balance Sheet /Horizontal Analysis or Trend Analysis: Definition and
Explanation of Horizontal or Trend Analysis:

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4.3 Financial Analysis with Some Ratios:

2013 2012 2011 2010 2009

Return on Assets: It shows how capable the management of the bank has been in
converting the institutions assets into net earnings, as it calculates how much a bank
earns using Tk. 1 of assets. Here the return in asset has a fluctuating trend. It varies
between Tk. 0.0033 to Tk. 0.0086 between 2009 and 2013 and being its highest in 2011.

2013 2012 2011 2010 2009

Return on Equity: Till 2011, it shows increase in the trend. But after that, there is a
fluctuation, in 2012 and 2013. The net income affected the ROE due to reasons like
instruction of Bangladesh Bank to limit the Credit Deposit Ratio within 85%. So the
banks have to take deposit in higher competitive rates.

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 2013 2012 2011 2010 2009

Net Interest Income: NII shows an increasing trend. The higher, the better for the
company because it shows high amount of net interest income which is based on FSIBLs
smooth operation on the focused investments.

2013 2012 2011 2010 2009

Net Interest Income as a % of TRGA: NII as % of TRGA shows how a banks net interest
income is increasing by utilizing its revenue generating assets. This particular ratio also
shows a slight fall on the 2012 rate which happened because of the slow pace in the
economic growth that year.

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 2013 2012 2011 2010 2009

Net Non Interest Income as a % of TRGA: Net non interest income shows the fluctuating
trend over 5 years. The highest amount of NNII as % of TRGA is in the year of
2011which explains that FSIBLs main earning revenue sources are non operating income
in this year, which has both positive and negative sides. As non operating income is not
the main source of income of a company.

2013 2012 2011 2010 2009

Earnings per Share: Earnings per share show a decreasing trend in the graph. In 2009, the
EPS was Tk. 7.35. But due to major changes in the business operations and a shift
towards investing in an Islamic way, the EPS fell excessively. In 2013, the graph shows
slight increase in the order.

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 2013 2012 2011 2010 2009

Earnings Spread: Earnings spread shows how much money the bank generates from
income utilizing the assets and liabilities. In 2008, the earnings spread of the bank is high
compared to the other years. The bank is efficient in their intermediary function as the
graph shows that, the earning spread is not highly fluctuating from 2009-2013

2013 2012 2011 2010 2009

Interest Sensitive Gap: The graph shows the bank's control on the volume of interest rate
sensitive assets and liabilities. The IS gap is showing an increasing value from the year
2009- 2013 and the bank's IS gap is positive. Thus it means they have an asset sensitive
gap. The interest/profit rate is adjusted as the asset of the bank is not compromised and
the interest income is higher than interest expense.

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 CHAPTER-5:
RECOMMENDATIONS & CONCLUSION

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5.1 RECOMMENDATIONS:
The failure of commercial banks occurs mainly due to bad loans, which occur due to in
efficient management of the loans and advances portfolio. Therefore any banks must be
extremely cautious about its lending portfolio and credit policy.
To improve the credit portfolio further, FSIBL should adopt some of the industry best
practices that are not practiced currently. These are

1. Approval authority should be delegated to individual executives rather than

Executive Committee/ Board to ensure accountability.
2. The responsibilities of the key persons of the above function must also be clearly
specified.
3. An Early Alert Account system should be introduced to have adequate monitoring,
supervision or close attention by management.
4. There should be a Recovery Unit to manage directly accounts with sustained
deterioration. To encourage Recovery Unit incentive program may also
introduced
5. They should increase the strength of investment risk management department.
6. Need to speed up processing of loan application but give more importance
monitoring and screening. The procedure of credit facility has to be reduced, to
compete with other commercial banks.
7. Investment policy & procedure should be flexible, easier & understandable so that
business people can understand and cope with that.
8. Investment processing time should be reduced so that businessman can avail the
real business opportunity.

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5.2 CONCLUSION :
Banks and financial institutions play an important role in the process of economic growth
of a country. Given their considerable economic potential, these institutions have a far
reaching impact on the development and welfare process of the surrounding societies.
These financial institutions depend, in accumulating their financial resources, basically on
the inflow of deposits. In order to survive and achieve success, these banks endeavor to
attract clients in search of investments to finance their different activities according to the
banks established terms and conditions. These banks, which are called commercial banks,
depend in their transactions on the interest rate, as the driving factor, which stimulates all
their dealings.

In a developing country like Bangladesh, banking business is very much competitive.

Almost fifty banks are operating at this moment and competing to hold maximum market
share. For a smoothen operation every bank must have the capability of managing
asset/liability, liquidity and credit.

Asset / liability management has become an almost universally accepted approach to risk
management. Since capital and profitability are intimately linked, First Security Islami
Bank Ltd. is managing its asset / liability in order to ensure sustained profitability so that
the bank can maintain and augment its capital resources.

Liquidity is one of the essential requirements for the effective functioning of the banking
system. Without adequate liquidity, banks are not able to perform some of their core
functions, including the settlement of their inter-bank obligations. From the analysis we
can also observe that FSIBL is managing liquidity very well and in a sound liquidity
position.

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BIBLIOGRAPHY:

Books:
1. Several Newsletters From FSIBL Bank
2. Annual Report of FSIBL Bank Limited-2009-2013
3. Different type of brochures of FSIBL Bank.
4. Articles of FSIBL Bank
5. A. J. Strickland
6. Design and Operation of Customer service System. Paul S. Bender.
7. Foreign Exchange and Financing of Foreign Trade. Syed Asraf Ali
8. Background of FSIBL Bank Ltd, available at http:\\www.
fsiblbd.com\backgroundt.htm

Web Sites
www.fsiblbd.com
www.dsebd.org
www.bangladeshbank.org.bd
www.google.com
www.wikipedia.com
www.aboutmarketing.com

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