term paper on financial institution analysis of idlc finance
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South East University
Term paper on Financial Institution Analysis
Term paper on Financial
Institution Analysis of IDLC
Finance
Southeast University
South East University
Term paper on Financial Institution Analysis
[Year]
Submitted by
Rajib Alam
2011010000195
Batch No 27th
Section F
Course Code FIN-2122
Course Title
Financial
Management
South East University
Term paper on Financial Institution Analysis
Southeast University
Term paper on Financial Institution Analysis
Abstract
This paper examines the issues or topics which are presently subject to Financial Institution
analysis of IDLC financial institutions The paper demonstrates that there has been diversity in
the Topics or issues which non finance believes to be important A financial institution of the
most critical issues or topics is provided which should be helpful to those engaged in doing
analysis for financial institutions IDLC Finance Limited one of renowned non banking financial
institution in Bangladesh It started its operation at 1985 and it is the pioneer financial institution
in Bangladesh IDLC Finance Limited has different kinds of products and services IDLC is
financing in different sectors through their products and services IDLC Finance Limited is a
mother company I have done my term paper in IDLC finance And my topic was the
ldquoFinancial Institution analysis of IDLC Financerdquo In Bangladesh investment bank mainly
perform four kinds of activities They are issue management underwriting portfolio
management and corporate advising IDLC Finance Limited is performing all of these four
activities IDLC Finance Limited is providing different capital market related services to the
corporation and institution seeking for the funds and individuals seeking opportunities to
invest their fund in different securities The companies wide array products and services
range from retail products such as home loans car loans corporate and SME products
including lease and term loans structured finance services are ranging from syndication to
capital restructuring and a complete suite of merchant banking and capital market service
IDLC Finance Limited is Financial institution its activities in such a way that why number of
client of it increasing day by day It is a very good sign for a capital market IDLC
Finance Limited is a providing good return to its parent company as well as the
country economy through its activities The current term paper aimed at critically examining the
Analyzed of a private financial institution The main objective of this term paper was to analyze the
financial institution analysis of IDLC finance ltd along with how efficiently are providing services to
its customer From Financial Analysis it has been seen that the performance of IDLC finance ltd is
really satisfy
Southeast University
Term paper on Financial Institutions Analysis of IDLC
Acknowledgement
Itrsquos a matter of great contentment to be able to complete this term paper in due time My
endeavor will be considered successful if the term paper is of any help to you At the very
outset I would like to express my heartiest gratitude to Almighty Allah for giving me the
capacity to complete this task Then I would like to place my humble gratitude to my
respected faculty Lecturer S M Mujahidul Islam SEU Business School Southeast
University for his valuable time commitment guidance patience and stimulation made
along with the course of action I have put my best effort to make this report to serve its
purpose that is to come across the Financial Institution analysis of IDLC Finance
Limited I would like to avail the opportunity of expressing my deep gratitude and regards
to my parents for their continuous support I am indebted to all of my classmates to
support and providing me with his experience and practical knowledge in this regard
Along with this I want to thank one other people who is Md Harun ur Rashid He is my
brother Without the help of these people this term paper probably wouldnrsquot be completed
in due time
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 6
11Analysis of Financial Institutions
Analyzing a financial institution is very different from analyzing a corporate entity When a
financial institution has liquidity problems the end can be fast and furious This two day
class will cover the qualitative and quantitative analysis of financial institutions Exercises
and case studies are included
12 Introduction
One of the renowned names in Bangladesh financial market is financial institution Some
financial institutions serve as pass through or agency institutions where the risks and returns
to clients depend primarily on the investment results of the institutions Such institutions
include mutual funds hedge funds REITs and defined contribution plans such as 401k plans
Other financial institutions serve as guarantors or principal institutions where the institutions
offer a fixed return to clients and the institutions retain the actual risks and returns of their
investments This group includes commercial banks Non- financial institution insurance
companies sovereign funds and defined benefit pension plans Leasing Company (IDLC)
Limited It started operation in the year 1985 as the pioneer leasing company as to facilitate
lease- financing and capital investment in industrial sector with the view of ldquoBecome the
best performing and most innovative solutions provider in the countryrdquo For introducing new
multitude of diverse financial products and services in 2007 the company changed its name to
IDLC Finance Ltd Over the last two decades IDLC has contributed relentlessly in the
countryrsquos transition into a developing country and has emerged as Bangladeshrsquos leading multi
product financial institution The company now offers financial and technological solutions to
both institutional and individual clients to cater for their unique requirement
13 Origin of the report
This term paper is a course requirement of ldquoFIN-2122 Financial Managementrdquo Our
honorable course instructor assigned us the topic and the report was conducted on Financial
Institution and IDLC finance Ltd I am very glad to have his suggestion and guidelines in
this regard The report mainly focused on the Financial Institution and leasing companyrsquos
functions source of fund investment and rules and regulation regarding leasing company
But as Financial Institution analysis is one of the highest concerns of todayrsquos financial
institutions we also focus on the Financial Institution Analysis of the firm
14 Statement of the problem
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 7
This study arises from the need to know the financial institution analysis in the firm more
effectively The rapid growth of securities financing company and Investments Company are
really thinks about the financial institution Now a days it is known that the financial
institution analysis the organizational performance very well In financial institution analysis
there is lots of important thing We can also be able to know that how these things are helping
or be the independent variable of the knowledge sharing
Accordingly organization from different sectors across industries and through different time
periods should use these financial institution analysis tools Nevertheless researcher has yet to
examine in depth the probable influence of financial institution analysis of a firm in different
conditions However the reason why individual employees decide whether to actively
participate in financial institution analysis activities are currently not well understood
Therefore this research aims to contribute to the general understanding of the barriers
determining the success of financial institution analysis in organizations in general and to the
organization under study in particular ldquoKnowledge is one of the few assets that grows also
usually exponentially when shared financial institution analysis is believed to be one of the
most important processes for financial analysis Davenport and Prusak (2000) and Chua
(2003) however indicate that financial institution is analysis in organizations whether the
process is deliberately managed or not Junnarkar (1997) also supports this View of readily
established analysis communities within the organizational framework even before
management makes any kind of effort towards establishing them Companies are seeking to
implement special KM projects which aim to establish an environment within organizations
that will support the effective analysis creation transfer and use (Davenport et al 1998) All
analysis management initiatives try to foster the sharing of knowledge ideas and
experiences in whatever form among individuals or groupsrdquo as Cabrera and Cabrera (2002)
point out Nevertheless it is accepted that ldquowilling to share participantsrdquo is the key factor for
a successful implementation of any KM process (Koulopoulos and Frappaolo 1999)
15 Objective of the study
151 Broad Objective
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 8
152 Specific Objective
21 Clarifying the Concepts
A financial institution is an institution that provides financial services for its clients or
members Probably the most important financial service provided by financial institutions is
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 9
acting as financial intermediaries Most financial institutions are regulated by the
government Broadly speaking there are three major types of financial institutions
1 Depositary Institutions Deposit-taking institutions that accept and manage deposits and
make loans including banks building societies credit unions trust companies and mortgage
loan companies
2 Contractual Institutions Insurance companies and pension funds and
3 Investment Institutes Investment Banks underwriters brokerage firms
Function Financial institutions provide service as intermediaries of financial markets They
are responsible for transferring funds from investors to companies in need of those funds
Financial institutions facilitate the flow of money through the economy
Standing settlement instructions Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved Limiting the trader to an SSI also lowers the
likelihood of a fraud
Regulation See also Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries economies Regulation structures differ in
each country but typically involve prudential regulation as well as consumer protection and
market stability Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks insurance companies and brokers
See also
Ban Consumer Credit Act 1974 (UK law) Credit union Financial economics Fractional-
reserve banking Full-reserve banking International financial institutions Non-bank financial
institution Savings and loan association
22Available Research
221 Financial Institutions Research Project
Financial intermediaries play a crucial role in channeling capital from investors to companies
We define financial intermediaries broadly including not only commercial banks but also
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
South East University
Term paper on Financial Institution Analysis
[Year]
Submitted by
Rajib Alam
2011010000195
Batch No 27th
Section F
Course Code FIN-2122
Course Title
Financial
Management
South East University
Term paper on Financial Institution Analysis
Southeast University
Term paper on Financial Institution Analysis
Abstract
This paper examines the issues or topics which are presently subject to Financial Institution
analysis of IDLC financial institutions The paper demonstrates that there has been diversity in
the Topics or issues which non finance believes to be important A financial institution of the
most critical issues or topics is provided which should be helpful to those engaged in doing
analysis for financial institutions IDLC Finance Limited one of renowned non banking financial
institution in Bangladesh It started its operation at 1985 and it is the pioneer financial institution
in Bangladesh IDLC Finance Limited has different kinds of products and services IDLC is
financing in different sectors through their products and services IDLC Finance Limited is a
mother company I have done my term paper in IDLC finance And my topic was the
ldquoFinancial Institution analysis of IDLC Financerdquo In Bangladesh investment bank mainly
perform four kinds of activities They are issue management underwriting portfolio
management and corporate advising IDLC Finance Limited is performing all of these four
activities IDLC Finance Limited is providing different capital market related services to the
corporation and institution seeking for the funds and individuals seeking opportunities to
invest their fund in different securities The companies wide array products and services
range from retail products such as home loans car loans corporate and SME products
including lease and term loans structured finance services are ranging from syndication to
capital restructuring and a complete suite of merchant banking and capital market service
IDLC Finance Limited is Financial institution its activities in such a way that why number of
client of it increasing day by day It is a very good sign for a capital market IDLC
Finance Limited is a providing good return to its parent company as well as the
country economy through its activities The current term paper aimed at critically examining the
Analyzed of a private financial institution The main objective of this term paper was to analyze the
financial institution analysis of IDLC finance ltd along with how efficiently are providing services to
its customer From Financial Analysis it has been seen that the performance of IDLC finance ltd is
really satisfy
Southeast University
Term paper on Financial Institutions Analysis of IDLC
Acknowledgement
Itrsquos a matter of great contentment to be able to complete this term paper in due time My
endeavor will be considered successful if the term paper is of any help to you At the very
outset I would like to express my heartiest gratitude to Almighty Allah for giving me the
capacity to complete this task Then I would like to place my humble gratitude to my
respected faculty Lecturer S M Mujahidul Islam SEU Business School Southeast
University for his valuable time commitment guidance patience and stimulation made
along with the course of action I have put my best effort to make this report to serve its
purpose that is to come across the Financial Institution analysis of IDLC Finance
Limited I would like to avail the opportunity of expressing my deep gratitude and regards
to my parents for their continuous support I am indebted to all of my classmates to
support and providing me with his experience and practical knowledge in this regard
Along with this I want to thank one other people who is Md Harun ur Rashid He is my
brother Without the help of these people this term paper probably wouldnrsquot be completed
in due time
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 6
11Analysis of Financial Institutions
Analyzing a financial institution is very different from analyzing a corporate entity When a
financial institution has liquidity problems the end can be fast and furious This two day
class will cover the qualitative and quantitative analysis of financial institutions Exercises
and case studies are included
12 Introduction
One of the renowned names in Bangladesh financial market is financial institution Some
financial institutions serve as pass through or agency institutions where the risks and returns
to clients depend primarily on the investment results of the institutions Such institutions
include mutual funds hedge funds REITs and defined contribution plans such as 401k plans
Other financial institutions serve as guarantors or principal institutions where the institutions
offer a fixed return to clients and the institutions retain the actual risks and returns of their
investments This group includes commercial banks Non- financial institution insurance
companies sovereign funds and defined benefit pension plans Leasing Company (IDLC)
Limited It started operation in the year 1985 as the pioneer leasing company as to facilitate
lease- financing and capital investment in industrial sector with the view of ldquoBecome the
best performing and most innovative solutions provider in the countryrdquo For introducing new
multitude of diverse financial products and services in 2007 the company changed its name to
IDLC Finance Ltd Over the last two decades IDLC has contributed relentlessly in the
countryrsquos transition into a developing country and has emerged as Bangladeshrsquos leading multi
product financial institution The company now offers financial and technological solutions to
both institutional and individual clients to cater for their unique requirement
13 Origin of the report
This term paper is a course requirement of ldquoFIN-2122 Financial Managementrdquo Our
honorable course instructor assigned us the topic and the report was conducted on Financial
Institution and IDLC finance Ltd I am very glad to have his suggestion and guidelines in
this regard The report mainly focused on the Financial Institution and leasing companyrsquos
functions source of fund investment and rules and regulation regarding leasing company
But as Financial Institution analysis is one of the highest concerns of todayrsquos financial
institutions we also focus on the Financial Institution Analysis of the firm
14 Statement of the problem
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 7
This study arises from the need to know the financial institution analysis in the firm more
effectively The rapid growth of securities financing company and Investments Company are
really thinks about the financial institution Now a days it is known that the financial
institution analysis the organizational performance very well In financial institution analysis
there is lots of important thing We can also be able to know that how these things are helping
or be the independent variable of the knowledge sharing
Accordingly organization from different sectors across industries and through different time
periods should use these financial institution analysis tools Nevertheless researcher has yet to
examine in depth the probable influence of financial institution analysis of a firm in different
conditions However the reason why individual employees decide whether to actively
participate in financial institution analysis activities are currently not well understood
Therefore this research aims to contribute to the general understanding of the barriers
determining the success of financial institution analysis in organizations in general and to the
organization under study in particular ldquoKnowledge is one of the few assets that grows also
usually exponentially when shared financial institution analysis is believed to be one of the
most important processes for financial analysis Davenport and Prusak (2000) and Chua
(2003) however indicate that financial institution is analysis in organizations whether the
process is deliberately managed or not Junnarkar (1997) also supports this View of readily
established analysis communities within the organizational framework even before
management makes any kind of effort towards establishing them Companies are seeking to
implement special KM projects which aim to establish an environment within organizations
that will support the effective analysis creation transfer and use (Davenport et al 1998) All
analysis management initiatives try to foster the sharing of knowledge ideas and
experiences in whatever form among individuals or groupsrdquo as Cabrera and Cabrera (2002)
point out Nevertheless it is accepted that ldquowilling to share participantsrdquo is the key factor for
a successful implementation of any KM process (Koulopoulos and Frappaolo 1999)
15 Objective of the study
151 Broad Objective
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 8
152 Specific Objective
21 Clarifying the Concepts
A financial institution is an institution that provides financial services for its clients or
members Probably the most important financial service provided by financial institutions is
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 9
acting as financial intermediaries Most financial institutions are regulated by the
government Broadly speaking there are three major types of financial institutions
1 Depositary Institutions Deposit-taking institutions that accept and manage deposits and
make loans including banks building societies credit unions trust companies and mortgage
loan companies
2 Contractual Institutions Insurance companies and pension funds and
3 Investment Institutes Investment Banks underwriters brokerage firms
Function Financial institutions provide service as intermediaries of financial markets They
are responsible for transferring funds from investors to companies in need of those funds
Financial institutions facilitate the flow of money through the economy
Standing settlement instructions Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved Limiting the trader to an SSI also lowers the
likelihood of a fraud
Regulation See also Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries economies Regulation structures differ in
each country but typically involve prudential regulation as well as consumer protection and
market stability Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks insurance companies and brokers
See also
Ban Consumer Credit Act 1974 (UK law) Credit union Financial economics Fractional-
reserve banking Full-reserve banking International financial institutions Non-bank financial
institution Savings and loan association
22Available Research
221 Financial Institutions Research Project
Financial intermediaries play a crucial role in channeling capital from investors to companies
We define financial intermediaries broadly including not only commercial banks but also
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
South East University
Term paper on Financial Institution Analysis
Southeast University
Term paper on Financial Institution Analysis
Abstract
This paper examines the issues or topics which are presently subject to Financial Institution
analysis of IDLC financial institutions The paper demonstrates that there has been diversity in
the Topics or issues which non finance believes to be important A financial institution of the
most critical issues or topics is provided which should be helpful to those engaged in doing
analysis for financial institutions IDLC Finance Limited one of renowned non banking financial
institution in Bangladesh It started its operation at 1985 and it is the pioneer financial institution
in Bangladesh IDLC Finance Limited has different kinds of products and services IDLC is
financing in different sectors through their products and services IDLC Finance Limited is a
mother company I have done my term paper in IDLC finance And my topic was the
ldquoFinancial Institution analysis of IDLC Financerdquo In Bangladesh investment bank mainly
perform four kinds of activities They are issue management underwriting portfolio
management and corporate advising IDLC Finance Limited is performing all of these four
activities IDLC Finance Limited is providing different capital market related services to the
corporation and institution seeking for the funds and individuals seeking opportunities to
invest their fund in different securities The companies wide array products and services
range from retail products such as home loans car loans corporate and SME products
including lease and term loans structured finance services are ranging from syndication to
capital restructuring and a complete suite of merchant banking and capital market service
IDLC Finance Limited is Financial institution its activities in such a way that why number of
client of it increasing day by day It is a very good sign for a capital market IDLC
Finance Limited is a providing good return to its parent company as well as the
country economy through its activities The current term paper aimed at critically examining the
Analyzed of a private financial institution The main objective of this term paper was to analyze the
financial institution analysis of IDLC finance ltd along with how efficiently are providing services to
its customer From Financial Analysis it has been seen that the performance of IDLC finance ltd is
really satisfy
Southeast University
Term paper on Financial Institutions Analysis of IDLC
Acknowledgement
Itrsquos a matter of great contentment to be able to complete this term paper in due time My
endeavor will be considered successful if the term paper is of any help to you At the very
outset I would like to express my heartiest gratitude to Almighty Allah for giving me the
capacity to complete this task Then I would like to place my humble gratitude to my
respected faculty Lecturer S M Mujahidul Islam SEU Business School Southeast
University for his valuable time commitment guidance patience and stimulation made
along with the course of action I have put my best effort to make this report to serve its
purpose that is to come across the Financial Institution analysis of IDLC Finance
Limited I would like to avail the opportunity of expressing my deep gratitude and regards
to my parents for their continuous support I am indebted to all of my classmates to
support and providing me with his experience and practical knowledge in this regard
Along with this I want to thank one other people who is Md Harun ur Rashid He is my
brother Without the help of these people this term paper probably wouldnrsquot be completed
in due time
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 6
11Analysis of Financial Institutions
Analyzing a financial institution is very different from analyzing a corporate entity When a
financial institution has liquidity problems the end can be fast and furious This two day
class will cover the qualitative and quantitative analysis of financial institutions Exercises
and case studies are included
12 Introduction
One of the renowned names in Bangladesh financial market is financial institution Some
financial institutions serve as pass through or agency institutions where the risks and returns
to clients depend primarily on the investment results of the institutions Such institutions
include mutual funds hedge funds REITs and defined contribution plans such as 401k plans
Other financial institutions serve as guarantors or principal institutions where the institutions
offer a fixed return to clients and the institutions retain the actual risks and returns of their
investments This group includes commercial banks Non- financial institution insurance
companies sovereign funds and defined benefit pension plans Leasing Company (IDLC)
Limited It started operation in the year 1985 as the pioneer leasing company as to facilitate
lease- financing and capital investment in industrial sector with the view of ldquoBecome the
best performing and most innovative solutions provider in the countryrdquo For introducing new
multitude of diverse financial products and services in 2007 the company changed its name to
IDLC Finance Ltd Over the last two decades IDLC has contributed relentlessly in the
countryrsquos transition into a developing country and has emerged as Bangladeshrsquos leading multi
product financial institution The company now offers financial and technological solutions to
both institutional and individual clients to cater for their unique requirement
13 Origin of the report
This term paper is a course requirement of ldquoFIN-2122 Financial Managementrdquo Our
honorable course instructor assigned us the topic and the report was conducted on Financial
Institution and IDLC finance Ltd I am very glad to have his suggestion and guidelines in
this regard The report mainly focused on the Financial Institution and leasing companyrsquos
functions source of fund investment and rules and regulation regarding leasing company
But as Financial Institution analysis is one of the highest concerns of todayrsquos financial
institutions we also focus on the Financial Institution Analysis of the firm
14 Statement of the problem
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 7
This study arises from the need to know the financial institution analysis in the firm more
effectively The rapid growth of securities financing company and Investments Company are
really thinks about the financial institution Now a days it is known that the financial
institution analysis the organizational performance very well In financial institution analysis
there is lots of important thing We can also be able to know that how these things are helping
or be the independent variable of the knowledge sharing
Accordingly organization from different sectors across industries and through different time
periods should use these financial institution analysis tools Nevertheless researcher has yet to
examine in depth the probable influence of financial institution analysis of a firm in different
conditions However the reason why individual employees decide whether to actively
participate in financial institution analysis activities are currently not well understood
Therefore this research aims to contribute to the general understanding of the barriers
determining the success of financial institution analysis in organizations in general and to the
organization under study in particular ldquoKnowledge is one of the few assets that grows also
usually exponentially when shared financial institution analysis is believed to be one of the
most important processes for financial analysis Davenport and Prusak (2000) and Chua
(2003) however indicate that financial institution is analysis in organizations whether the
process is deliberately managed or not Junnarkar (1997) also supports this View of readily
established analysis communities within the organizational framework even before
management makes any kind of effort towards establishing them Companies are seeking to
implement special KM projects which aim to establish an environment within organizations
that will support the effective analysis creation transfer and use (Davenport et al 1998) All
analysis management initiatives try to foster the sharing of knowledge ideas and
experiences in whatever form among individuals or groupsrdquo as Cabrera and Cabrera (2002)
point out Nevertheless it is accepted that ldquowilling to share participantsrdquo is the key factor for
a successful implementation of any KM process (Koulopoulos and Frappaolo 1999)
15 Objective of the study
151 Broad Objective
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Term paper on Financial Institutions Analysis of IDLC Finance Page 8
152 Specific Objective
21 Clarifying the Concepts
A financial institution is an institution that provides financial services for its clients or
members Probably the most important financial service provided by financial institutions is
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 9
acting as financial intermediaries Most financial institutions are regulated by the
government Broadly speaking there are three major types of financial institutions
1 Depositary Institutions Deposit-taking institutions that accept and manage deposits and
make loans including banks building societies credit unions trust companies and mortgage
loan companies
2 Contractual Institutions Insurance companies and pension funds and
3 Investment Institutes Investment Banks underwriters brokerage firms
Function Financial institutions provide service as intermediaries of financial markets They
are responsible for transferring funds from investors to companies in need of those funds
Financial institutions facilitate the flow of money through the economy
Standing settlement instructions Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved Limiting the trader to an SSI also lowers the
likelihood of a fraud
Regulation See also Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries economies Regulation structures differ in
each country but typically involve prudential regulation as well as consumer protection and
market stability Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks insurance companies and brokers
See also
Ban Consumer Credit Act 1974 (UK law) Credit union Financial economics Fractional-
reserve banking Full-reserve banking International financial institutions Non-bank financial
institution Savings and loan association
22Available Research
221 Financial Institutions Research Project
Financial intermediaries play a crucial role in channeling capital from investors to companies
We define financial intermediaries broadly including not only commercial banks but also
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institution Analysis
Abstract
This paper examines the issues or topics which are presently subject to Financial Institution
analysis of IDLC financial institutions The paper demonstrates that there has been diversity in
the Topics or issues which non finance believes to be important A financial institution of the
most critical issues or topics is provided which should be helpful to those engaged in doing
analysis for financial institutions IDLC Finance Limited one of renowned non banking financial
institution in Bangladesh It started its operation at 1985 and it is the pioneer financial institution
in Bangladesh IDLC Finance Limited has different kinds of products and services IDLC is
financing in different sectors through their products and services IDLC Finance Limited is a
mother company I have done my term paper in IDLC finance And my topic was the
ldquoFinancial Institution analysis of IDLC Financerdquo In Bangladesh investment bank mainly
perform four kinds of activities They are issue management underwriting portfolio
management and corporate advising IDLC Finance Limited is performing all of these four
activities IDLC Finance Limited is providing different capital market related services to the
corporation and institution seeking for the funds and individuals seeking opportunities to
invest their fund in different securities The companies wide array products and services
range from retail products such as home loans car loans corporate and SME products
including lease and term loans structured finance services are ranging from syndication to
capital restructuring and a complete suite of merchant banking and capital market service
IDLC Finance Limited is Financial institution its activities in such a way that why number of
client of it increasing day by day It is a very good sign for a capital market IDLC
Finance Limited is a providing good return to its parent company as well as the
country economy through its activities The current term paper aimed at critically examining the
Analyzed of a private financial institution The main objective of this term paper was to analyze the
financial institution analysis of IDLC finance ltd along with how efficiently are providing services to
its customer From Financial Analysis it has been seen that the performance of IDLC finance ltd is
really satisfy
Southeast University
Term paper on Financial Institutions Analysis of IDLC
Acknowledgement
Itrsquos a matter of great contentment to be able to complete this term paper in due time My
endeavor will be considered successful if the term paper is of any help to you At the very
outset I would like to express my heartiest gratitude to Almighty Allah for giving me the
capacity to complete this task Then I would like to place my humble gratitude to my
respected faculty Lecturer S M Mujahidul Islam SEU Business School Southeast
University for his valuable time commitment guidance patience and stimulation made
along with the course of action I have put my best effort to make this report to serve its
purpose that is to come across the Financial Institution analysis of IDLC Finance
Limited I would like to avail the opportunity of expressing my deep gratitude and regards
to my parents for their continuous support I am indebted to all of my classmates to
support and providing me with his experience and practical knowledge in this regard
Along with this I want to thank one other people who is Md Harun ur Rashid He is my
brother Without the help of these people this term paper probably wouldnrsquot be completed
in due time
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 6
11Analysis of Financial Institutions
Analyzing a financial institution is very different from analyzing a corporate entity When a
financial institution has liquidity problems the end can be fast and furious This two day
class will cover the qualitative and quantitative analysis of financial institutions Exercises
and case studies are included
12 Introduction
One of the renowned names in Bangladesh financial market is financial institution Some
financial institutions serve as pass through or agency institutions where the risks and returns
to clients depend primarily on the investment results of the institutions Such institutions
include mutual funds hedge funds REITs and defined contribution plans such as 401k plans
Other financial institutions serve as guarantors or principal institutions where the institutions
offer a fixed return to clients and the institutions retain the actual risks and returns of their
investments This group includes commercial banks Non- financial institution insurance
companies sovereign funds and defined benefit pension plans Leasing Company (IDLC)
Limited It started operation in the year 1985 as the pioneer leasing company as to facilitate
lease- financing and capital investment in industrial sector with the view of ldquoBecome the
best performing and most innovative solutions provider in the countryrdquo For introducing new
multitude of diverse financial products and services in 2007 the company changed its name to
IDLC Finance Ltd Over the last two decades IDLC has contributed relentlessly in the
countryrsquos transition into a developing country and has emerged as Bangladeshrsquos leading multi
product financial institution The company now offers financial and technological solutions to
both institutional and individual clients to cater for their unique requirement
13 Origin of the report
This term paper is a course requirement of ldquoFIN-2122 Financial Managementrdquo Our
honorable course instructor assigned us the topic and the report was conducted on Financial
Institution and IDLC finance Ltd I am very glad to have his suggestion and guidelines in
this regard The report mainly focused on the Financial Institution and leasing companyrsquos
functions source of fund investment and rules and regulation regarding leasing company
But as Financial Institution analysis is one of the highest concerns of todayrsquos financial
institutions we also focus on the Financial Institution Analysis of the firm
14 Statement of the problem
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 7
This study arises from the need to know the financial institution analysis in the firm more
effectively The rapid growth of securities financing company and Investments Company are
really thinks about the financial institution Now a days it is known that the financial
institution analysis the organizational performance very well In financial institution analysis
there is lots of important thing We can also be able to know that how these things are helping
or be the independent variable of the knowledge sharing
Accordingly organization from different sectors across industries and through different time
periods should use these financial institution analysis tools Nevertheless researcher has yet to
examine in depth the probable influence of financial institution analysis of a firm in different
conditions However the reason why individual employees decide whether to actively
participate in financial institution analysis activities are currently not well understood
Therefore this research aims to contribute to the general understanding of the barriers
determining the success of financial institution analysis in organizations in general and to the
organization under study in particular ldquoKnowledge is one of the few assets that grows also
usually exponentially when shared financial institution analysis is believed to be one of the
most important processes for financial analysis Davenport and Prusak (2000) and Chua
(2003) however indicate that financial institution is analysis in organizations whether the
process is deliberately managed or not Junnarkar (1997) also supports this View of readily
established analysis communities within the organizational framework even before
management makes any kind of effort towards establishing them Companies are seeking to
implement special KM projects which aim to establish an environment within organizations
that will support the effective analysis creation transfer and use (Davenport et al 1998) All
analysis management initiatives try to foster the sharing of knowledge ideas and
experiences in whatever form among individuals or groupsrdquo as Cabrera and Cabrera (2002)
point out Nevertheless it is accepted that ldquowilling to share participantsrdquo is the key factor for
a successful implementation of any KM process (Koulopoulos and Frappaolo 1999)
15 Objective of the study
151 Broad Objective
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 8
152 Specific Objective
21 Clarifying the Concepts
A financial institution is an institution that provides financial services for its clients or
members Probably the most important financial service provided by financial institutions is
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 9
acting as financial intermediaries Most financial institutions are regulated by the
government Broadly speaking there are three major types of financial institutions
1 Depositary Institutions Deposit-taking institutions that accept and manage deposits and
make loans including banks building societies credit unions trust companies and mortgage
loan companies
2 Contractual Institutions Insurance companies and pension funds and
3 Investment Institutes Investment Banks underwriters brokerage firms
Function Financial institutions provide service as intermediaries of financial markets They
are responsible for transferring funds from investors to companies in need of those funds
Financial institutions facilitate the flow of money through the economy
Standing settlement instructions Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved Limiting the trader to an SSI also lowers the
likelihood of a fraud
Regulation See also Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries economies Regulation structures differ in
each country but typically involve prudential regulation as well as consumer protection and
market stability Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks insurance companies and brokers
See also
Ban Consumer Credit Act 1974 (UK law) Credit union Financial economics Fractional-
reserve banking Full-reserve banking International financial institutions Non-bank financial
institution Savings and loan association
22Available Research
221 Financial Institutions Research Project
Financial intermediaries play a crucial role in channeling capital from investors to companies
We define financial intermediaries broadly including not only commercial banks but also
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC
Acknowledgement
Itrsquos a matter of great contentment to be able to complete this term paper in due time My
endeavor will be considered successful if the term paper is of any help to you At the very
outset I would like to express my heartiest gratitude to Almighty Allah for giving me the
capacity to complete this task Then I would like to place my humble gratitude to my
respected faculty Lecturer S M Mujahidul Islam SEU Business School Southeast
University for his valuable time commitment guidance patience and stimulation made
along with the course of action I have put my best effort to make this report to serve its
purpose that is to come across the Financial Institution analysis of IDLC Finance
Limited I would like to avail the opportunity of expressing my deep gratitude and regards
to my parents for their continuous support I am indebted to all of my classmates to
support and providing me with his experience and practical knowledge in this regard
Along with this I want to thank one other people who is Md Harun ur Rashid He is my
brother Without the help of these people this term paper probably wouldnrsquot be completed
in due time
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 6
11Analysis of Financial Institutions
Analyzing a financial institution is very different from analyzing a corporate entity When a
financial institution has liquidity problems the end can be fast and furious This two day
class will cover the qualitative and quantitative analysis of financial institutions Exercises
and case studies are included
12 Introduction
One of the renowned names in Bangladesh financial market is financial institution Some
financial institutions serve as pass through or agency institutions where the risks and returns
to clients depend primarily on the investment results of the institutions Such institutions
include mutual funds hedge funds REITs and defined contribution plans such as 401k plans
Other financial institutions serve as guarantors or principal institutions where the institutions
offer a fixed return to clients and the institutions retain the actual risks and returns of their
investments This group includes commercial banks Non- financial institution insurance
companies sovereign funds and defined benefit pension plans Leasing Company (IDLC)
Limited It started operation in the year 1985 as the pioneer leasing company as to facilitate
lease- financing and capital investment in industrial sector with the view of ldquoBecome the
best performing and most innovative solutions provider in the countryrdquo For introducing new
multitude of diverse financial products and services in 2007 the company changed its name to
IDLC Finance Ltd Over the last two decades IDLC has contributed relentlessly in the
countryrsquos transition into a developing country and has emerged as Bangladeshrsquos leading multi
product financial institution The company now offers financial and technological solutions to
both institutional and individual clients to cater for their unique requirement
13 Origin of the report
This term paper is a course requirement of ldquoFIN-2122 Financial Managementrdquo Our
honorable course instructor assigned us the topic and the report was conducted on Financial
Institution and IDLC finance Ltd I am very glad to have his suggestion and guidelines in
this regard The report mainly focused on the Financial Institution and leasing companyrsquos
functions source of fund investment and rules and regulation regarding leasing company
But as Financial Institution analysis is one of the highest concerns of todayrsquos financial
institutions we also focus on the Financial Institution Analysis of the firm
14 Statement of the problem
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 7
This study arises from the need to know the financial institution analysis in the firm more
effectively The rapid growth of securities financing company and Investments Company are
really thinks about the financial institution Now a days it is known that the financial
institution analysis the organizational performance very well In financial institution analysis
there is lots of important thing We can also be able to know that how these things are helping
or be the independent variable of the knowledge sharing
Accordingly organization from different sectors across industries and through different time
periods should use these financial institution analysis tools Nevertheless researcher has yet to
examine in depth the probable influence of financial institution analysis of a firm in different
conditions However the reason why individual employees decide whether to actively
participate in financial institution analysis activities are currently not well understood
Therefore this research aims to contribute to the general understanding of the barriers
determining the success of financial institution analysis in organizations in general and to the
organization under study in particular ldquoKnowledge is one of the few assets that grows also
usually exponentially when shared financial institution analysis is believed to be one of the
most important processes for financial analysis Davenport and Prusak (2000) and Chua
(2003) however indicate that financial institution is analysis in organizations whether the
process is deliberately managed or not Junnarkar (1997) also supports this View of readily
established analysis communities within the organizational framework even before
management makes any kind of effort towards establishing them Companies are seeking to
implement special KM projects which aim to establish an environment within organizations
that will support the effective analysis creation transfer and use (Davenport et al 1998) All
analysis management initiatives try to foster the sharing of knowledge ideas and
experiences in whatever form among individuals or groupsrdquo as Cabrera and Cabrera (2002)
point out Nevertheless it is accepted that ldquowilling to share participantsrdquo is the key factor for
a successful implementation of any KM process (Koulopoulos and Frappaolo 1999)
15 Objective of the study
151 Broad Objective
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 8
152 Specific Objective
21 Clarifying the Concepts
A financial institution is an institution that provides financial services for its clients or
members Probably the most important financial service provided by financial institutions is
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 9
acting as financial intermediaries Most financial institutions are regulated by the
government Broadly speaking there are three major types of financial institutions
1 Depositary Institutions Deposit-taking institutions that accept and manage deposits and
make loans including banks building societies credit unions trust companies and mortgage
loan companies
2 Contractual Institutions Insurance companies and pension funds and
3 Investment Institutes Investment Banks underwriters brokerage firms
Function Financial institutions provide service as intermediaries of financial markets They
are responsible for transferring funds from investors to companies in need of those funds
Financial institutions facilitate the flow of money through the economy
Standing settlement instructions Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved Limiting the trader to an SSI also lowers the
likelihood of a fraud
Regulation See also Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries economies Regulation structures differ in
each country but typically involve prudential regulation as well as consumer protection and
market stability Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks insurance companies and brokers
See also
Ban Consumer Credit Act 1974 (UK law) Credit union Financial economics Fractional-
reserve banking Full-reserve banking International financial institutions Non-bank financial
institution Savings and loan association
22Available Research
221 Financial Institutions Research Project
Financial intermediaries play a crucial role in channeling capital from investors to companies
We define financial intermediaries broadly including not only commercial banks but also
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
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Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 6
11Analysis of Financial Institutions
Analyzing a financial institution is very different from analyzing a corporate entity When a
financial institution has liquidity problems the end can be fast and furious This two day
class will cover the qualitative and quantitative analysis of financial institutions Exercises
and case studies are included
12 Introduction
One of the renowned names in Bangladesh financial market is financial institution Some
financial institutions serve as pass through or agency institutions where the risks and returns
to clients depend primarily on the investment results of the institutions Such institutions
include mutual funds hedge funds REITs and defined contribution plans such as 401k plans
Other financial institutions serve as guarantors or principal institutions where the institutions
offer a fixed return to clients and the institutions retain the actual risks and returns of their
investments This group includes commercial banks Non- financial institution insurance
companies sovereign funds and defined benefit pension plans Leasing Company (IDLC)
Limited It started operation in the year 1985 as the pioneer leasing company as to facilitate
lease- financing and capital investment in industrial sector with the view of ldquoBecome the
best performing and most innovative solutions provider in the countryrdquo For introducing new
multitude of diverse financial products and services in 2007 the company changed its name to
IDLC Finance Ltd Over the last two decades IDLC has contributed relentlessly in the
countryrsquos transition into a developing country and has emerged as Bangladeshrsquos leading multi
product financial institution The company now offers financial and technological solutions to
both institutional and individual clients to cater for their unique requirement
13 Origin of the report
This term paper is a course requirement of ldquoFIN-2122 Financial Managementrdquo Our
honorable course instructor assigned us the topic and the report was conducted on Financial
Institution and IDLC finance Ltd I am very glad to have his suggestion and guidelines in
this regard The report mainly focused on the Financial Institution and leasing companyrsquos
functions source of fund investment and rules and regulation regarding leasing company
But as Financial Institution analysis is one of the highest concerns of todayrsquos financial
institutions we also focus on the Financial Institution Analysis of the firm
14 Statement of the problem
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 7
This study arises from the need to know the financial institution analysis in the firm more
effectively The rapid growth of securities financing company and Investments Company are
really thinks about the financial institution Now a days it is known that the financial
institution analysis the organizational performance very well In financial institution analysis
there is lots of important thing We can also be able to know that how these things are helping
or be the independent variable of the knowledge sharing
Accordingly organization from different sectors across industries and through different time
periods should use these financial institution analysis tools Nevertheless researcher has yet to
examine in depth the probable influence of financial institution analysis of a firm in different
conditions However the reason why individual employees decide whether to actively
participate in financial institution analysis activities are currently not well understood
Therefore this research aims to contribute to the general understanding of the barriers
determining the success of financial institution analysis in organizations in general and to the
organization under study in particular ldquoKnowledge is one of the few assets that grows also
usually exponentially when shared financial institution analysis is believed to be one of the
most important processes for financial analysis Davenport and Prusak (2000) and Chua
(2003) however indicate that financial institution is analysis in organizations whether the
process is deliberately managed or not Junnarkar (1997) also supports this View of readily
established analysis communities within the organizational framework even before
management makes any kind of effort towards establishing them Companies are seeking to
implement special KM projects which aim to establish an environment within organizations
that will support the effective analysis creation transfer and use (Davenport et al 1998) All
analysis management initiatives try to foster the sharing of knowledge ideas and
experiences in whatever form among individuals or groupsrdquo as Cabrera and Cabrera (2002)
point out Nevertheless it is accepted that ldquowilling to share participantsrdquo is the key factor for
a successful implementation of any KM process (Koulopoulos and Frappaolo 1999)
15 Objective of the study
151 Broad Objective
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Term paper on Financial Institutions Analysis of IDLC Finance Page 8
152 Specific Objective
21 Clarifying the Concepts
A financial institution is an institution that provides financial services for its clients or
members Probably the most important financial service provided by financial institutions is
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 9
acting as financial intermediaries Most financial institutions are regulated by the
government Broadly speaking there are three major types of financial institutions
1 Depositary Institutions Deposit-taking institutions that accept and manage deposits and
make loans including banks building societies credit unions trust companies and mortgage
loan companies
2 Contractual Institutions Insurance companies and pension funds and
3 Investment Institutes Investment Banks underwriters brokerage firms
Function Financial institutions provide service as intermediaries of financial markets They
are responsible for transferring funds from investors to companies in need of those funds
Financial institutions facilitate the flow of money through the economy
Standing settlement instructions Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved Limiting the trader to an SSI also lowers the
likelihood of a fraud
Regulation See also Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries economies Regulation structures differ in
each country but typically involve prudential regulation as well as consumer protection and
market stability Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks insurance companies and brokers
See also
Ban Consumer Credit Act 1974 (UK law) Credit union Financial economics Fractional-
reserve banking Full-reserve banking International financial institutions Non-bank financial
institution Savings and loan association
22Available Research
221 Financial Institutions Research Project
Financial intermediaries play a crucial role in channeling capital from investors to companies
We define financial intermediaries broadly including not only commercial banks but also
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
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Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
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Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
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Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
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Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
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Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
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Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
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Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
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Term paper on Financial Institutions Analysis of IDLC Finance Page 7
This study arises from the need to know the financial institution analysis in the firm more
effectively The rapid growth of securities financing company and Investments Company are
really thinks about the financial institution Now a days it is known that the financial
institution analysis the organizational performance very well In financial institution analysis
there is lots of important thing We can also be able to know that how these things are helping
or be the independent variable of the knowledge sharing
Accordingly organization from different sectors across industries and through different time
periods should use these financial institution analysis tools Nevertheless researcher has yet to
examine in depth the probable influence of financial institution analysis of a firm in different
conditions However the reason why individual employees decide whether to actively
participate in financial institution analysis activities are currently not well understood
Therefore this research aims to contribute to the general understanding of the barriers
determining the success of financial institution analysis in organizations in general and to the
organization under study in particular ldquoKnowledge is one of the few assets that grows also
usually exponentially when shared financial institution analysis is believed to be one of the
most important processes for financial analysis Davenport and Prusak (2000) and Chua
(2003) however indicate that financial institution is analysis in organizations whether the
process is deliberately managed or not Junnarkar (1997) also supports this View of readily
established analysis communities within the organizational framework even before
management makes any kind of effort towards establishing them Companies are seeking to
implement special KM projects which aim to establish an environment within organizations
that will support the effective analysis creation transfer and use (Davenport et al 1998) All
analysis management initiatives try to foster the sharing of knowledge ideas and
experiences in whatever form among individuals or groupsrdquo as Cabrera and Cabrera (2002)
point out Nevertheless it is accepted that ldquowilling to share participantsrdquo is the key factor for
a successful implementation of any KM process (Koulopoulos and Frappaolo 1999)
15 Objective of the study
151 Broad Objective
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Term paper on Financial Institutions Analysis of IDLC Finance Page 8
152 Specific Objective
21 Clarifying the Concepts
A financial institution is an institution that provides financial services for its clients or
members Probably the most important financial service provided by financial institutions is
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 9
acting as financial intermediaries Most financial institutions are regulated by the
government Broadly speaking there are three major types of financial institutions
1 Depositary Institutions Deposit-taking institutions that accept and manage deposits and
make loans including banks building societies credit unions trust companies and mortgage
loan companies
2 Contractual Institutions Insurance companies and pension funds and
3 Investment Institutes Investment Banks underwriters brokerage firms
Function Financial institutions provide service as intermediaries of financial markets They
are responsible for transferring funds from investors to companies in need of those funds
Financial institutions facilitate the flow of money through the economy
Standing settlement instructions Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved Limiting the trader to an SSI also lowers the
likelihood of a fraud
Regulation See also Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries economies Regulation structures differ in
each country but typically involve prudential regulation as well as consumer protection and
market stability Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks insurance companies and brokers
See also
Ban Consumer Credit Act 1974 (UK law) Credit union Financial economics Fractional-
reserve banking Full-reserve banking International financial institutions Non-bank financial
institution Savings and loan association
22Available Research
221 Financial Institutions Research Project
Financial intermediaries play a crucial role in channeling capital from investors to companies
We define financial intermediaries broadly including not only commercial banks but also
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
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Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
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Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
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Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
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Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
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Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
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Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
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Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
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Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
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Term paper on Financial Institutions Analysis of IDLC Finance Page 8
152 Specific Objective
21 Clarifying the Concepts
A financial institution is an institution that provides financial services for its clients or
members Probably the most important financial service provided by financial institutions is
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Term paper on Financial Institutions Analysis of IDLC Finance Page 9
acting as financial intermediaries Most financial institutions are regulated by the
government Broadly speaking there are three major types of financial institutions
1 Depositary Institutions Deposit-taking institutions that accept and manage deposits and
make loans including banks building societies credit unions trust companies and mortgage
loan companies
2 Contractual Institutions Insurance companies and pension funds and
3 Investment Institutes Investment Banks underwriters brokerage firms
Function Financial institutions provide service as intermediaries of financial markets They
are responsible for transferring funds from investors to companies in need of those funds
Financial institutions facilitate the flow of money through the economy
Standing settlement instructions Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved Limiting the trader to an SSI also lowers the
likelihood of a fraud
Regulation See also Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries economies Regulation structures differ in
each country but typically involve prudential regulation as well as consumer protection and
market stability Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks insurance companies and brokers
See also
Ban Consumer Credit Act 1974 (UK law) Credit union Financial economics Fractional-
reserve banking Full-reserve banking International financial institutions Non-bank financial
institution Savings and loan association
22Available Research
221 Financial Institutions Research Project
Financial intermediaries play a crucial role in channeling capital from investors to companies
We define financial intermediaries broadly including not only commercial banks but also
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
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Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
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Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
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Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
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Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
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Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
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Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
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Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 9
acting as financial intermediaries Most financial institutions are regulated by the
government Broadly speaking there are three major types of financial institutions
1 Depositary Institutions Deposit-taking institutions that accept and manage deposits and
make loans including banks building societies credit unions trust companies and mortgage
loan companies
2 Contractual Institutions Insurance companies and pension funds and
3 Investment Institutes Investment Banks underwriters brokerage firms
Function Financial institutions provide service as intermediaries of financial markets They
are responsible for transferring funds from investors to companies in need of those funds
Financial institutions facilitate the flow of money through the economy
Standing settlement instructions Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved Limiting the trader to an SSI also lowers the
likelihood of a fraud
Regulation See also Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries economies Regulation structures differ in
each country but typically involve prudential regulation as well as consumer protection and
market stability Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks insurance companies and brokers
See also
Ban Consumer Credit Act 1974 (UK law) Credit union Financial economics Fractional-
reserve banking Full-reserve banking International financial institutions Non-bank financial
institution Savings and loan association
22Available Research
221 Financial Institutions Research Project
Financial intermediaries play a crucial role in channeling capital from investors to companies
We define financial intermediaries broadly including not only commercial banks but also
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 10
investment banks and providers of private equity and venture capital Thus our research
program focuses not only on lsquotraditionalrsquo banking questions such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital
222 Expert Insight into Bank and Insurance Financial Strength
As the scrutiny of banks has increased in the aftermath of the credit crisis the ability to
accurately assess the strength of banks and their security has become more important than
ever Moodys Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk
223 Bryce W Rowe CFA Senior Research Analyst Community Banks
Bryce Rowe is Bairdrsquos senior analyst covering Community Banks Business Development
Companies Prior to joining Baird in 2006 Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason In 2011 Bryce was
selected for The Wall Street Journalrsquos Best on the Street Analyst Survey for Commercial
Banks and Savings amp Loans ranking No 4 and his second recognition by The Wall Street
Journal He received a BA in Economics from the University of Virginia Bryce Rowe is
Bairdrsquos senior analyst covering Community Banks Business Development Companies Prior
to joining Baird in 2006 Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason In 2003 Bryce was selected for The Wall
Street Journalrsquos Best on the Street Analyst Survey for Commercial Banks and Savings amp
Loans He received a BA in Economics from the University of Virginia
224 David A George CFA Senior Research Analyst US Banks
David George is Bairdrsquos senior analyst covering US Banks Prior to joining Baird in 2007
he was a senior analyst at AG Edwards amp Sons covering large- and mid-cap regional banks
as well as the trust and processing banks In 2004 he was named a Top 50 Analyst by
Bloomberg Magazine finishing first in stock selection in the Regional Bank category He
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
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Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
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Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 11
also has seven years of experience in the banking industry as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares David received
a BA in Sociology from the College of Wooster (Ohio)
Factors
Rank
Location Convenience 1
Other Convenience Facto (such as parking hours and the like) 2
Advertising 3
Bank Atmosphere 4
31What is Data
Data is a collection of facts such as values or measurements It can be numbers words
measurements observations or even just descriptions of things
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 12
311 Data can be qualitative or quantitative
A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers)
Quantitative data can also be Discrete or
Continuous Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply Discrete data is counted Continuous data is measured
Example What do we know about Arrow the Dog
Collecting Data can be collected in many ways The simplest way is direct observation
Example you want to find how many cars pass by a certain point on a road in a 10-minute
intervalSo simply stand at that point on the road and count the cars that pass by in that
interval
Census or Sample A Census is when you collect data for every member of the group (the
whole population)A Sample is when you collect data just for selected members of the
group Example there are 120 people in your local football club You can ask everyone (all
120) what their age is That is a census Or you could just choose the people that are there this
afternoon That is a sample A census is accurate but hard to do A sample is not as accurate
but may be good enough and is a lot easier
Data or Datum The singular form is datum so we would say that datum is very high
Data is the plural so we can say the data are available but it is also a collection of facts
so the data is available is fine too
32 Data source And information
Two types of data Primary data and secondary data
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 13
What does each and every research project need to get results Data ndash or information ndash to
help answer questions understand a specific issue or support a hypothesis
At the Institute for Work amp Health researchers conduct many projects each year Some
projects involve going into workplaces and asking workers questions Researchers who do
this have specific work-health questions in mind that theyrsquod like answered
The answers ndash or data ndash used from the responses are called primary data
Other Institute projects involve using data that has already been gathered by someone else
such as survey information from the Canadian Census Researchers then examine this
information in a different way to find a response to their question This data are called
secondary data
33 I collected the secondary data
41 Company History and Background
IDLC financial Bangladeshrsquos pioneering leasing company was established in Dhaka in 1980
IDLC was formed through the collaboration of International Finance corporation (IFC) the
private sector wing of the world Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 14
German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank one of the largest
banks in South Korea Korea Development financing Corporation one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development a
leading international development agency The City Bank Limited one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited the first private sector
financial institution in Bangladesh and Sadharan Bima corporation the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans deposit
and capital market products and service to the Corparate Consumer and SME client
segments IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance The group is also highly regarded for its
professional pool of resource and progressive work environment In 2010 the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre the
United Nations Global Compact (UNGC) and finally the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1 as of June 302011
412 IDLCrsquos Vision Mission and Strategic Objectives
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 15
413 Our Corporate Philosophy
Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards
414 Goal
415 Strategic Objectives
1048657 Grow and develop our talent pool
1048657 Fully leverage new core banking platform
1048657 Optimize distribution points
1048657 Grow and diversify funding sources
1048657 Grow sales and service capabilities in Consumer Division
1048657 Aggressively grow SME portfolio
1048657 Focus on top-tier clients in Corporate
1048657 Consolidate capital market operations and enhance capabilities
1048657 Embrace internationally accepted corporate governance and sustainable
business practices
416 Core Values
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 16
417 Sector wise exposure ndash December 31 2012
418 SEGMENT PRODUCT AND SERVICE
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 17
IDLC offers products under four major business segments Consumer Corporate
Small and Medium Enterprise and Capital Markets
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly QuarterlyAnnual Earner Deposit
Double Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate
Corporate Finance Structured Finance Solutions
Term Loan Fund-raising LoanLeasprivate placement of Equity
Lease Finance Preference ShareBondForeign-currency Loan
Working Capital Finance Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Projectinfrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets
Small and Medium Enterprise
A Small enterprise Finance B1) Medium Enterprise Finance
SME Loan Term Loan
Abashan Loan Lease Finance
Seasonal Loan Working Capital Finance
Project Finance
Capital Markets Specialized Product
Portfolio Management B2) Supplier Finance
Discretion portfolio ManagementMAXCAP B3) Women Entrepreneur Loan
Margin Lending (Cop Invest) B4)Commercial Vehicle Loan
Investment Banking (IPORPO Bond Issuance Rights Rights shares offering Corporate Advisory ect)
Research
Brokerage Services
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 18
419 KEY FINANCIAL OF IDLC GROUP
4110 AWARDS AND ACHIEVEMENTS
SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005200620072009 and 2010
ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards
A ICMAB Beast Corporate Award 2010
B ICMAB Beast Corporate Performance Award 2008
C ICMAB National Beast Corporate Award 2007
ldquoCOMMWARD Excellence in Communication 2009rdquo and ldquoSuperbrandsrdquo recognition in 2009
42 Definition of Ratio Analysis
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 19
A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements Ratios are calculated from current year numbers and are then compared
to previous years other companies the industry or even the economy to judge the
performance of the company Ratio analysis is predominately used by proponents of
fundamental analysis
421Types of Ratio and Categories of Financial Ratios
Liquidity Measurement Ratios
a)Current Ratio
b) Quick Ratio
c) Cash Ratio
d) Cash Conversion Cycle
4) Operating Performance Ratios
) Fixed Asset Turnover
b) SalesRevenue Per Employee
c) Operating Cycle
5) Cash Flow Indicator Ratios
a) Operating Cash FlowSales Ratio
b) Free Cash FlowOperating Cash Ratio
c) Cash Flow Coverage Ratio
d) Dividend Payout Ratio
2) Profitability Indicator Ratios
a) Profit Margin Analysis
b) Effective Tax Rate
c) Return On Assets
d) Return On Equity
e) Return On Capital Employed
6) Investment Valuation Ratios
a) Per Share Data
b) PriceBook Value Ratio
c) PriceCash Flow Ratio
d) PriceEarnings Ratio
e) PriceEarnings To Growth Ratio
f) PriceSales Ratio
g) Dividend Yield
h) Enterprise Value Multiple
3) Debt Ratios
a) Overview of Debt
b) Debt Ratio
c) Debt-Equity Ratio
d) Capitalization Ratio
e) Interest Coverage Ratio
f) Cash Flow To Debt Ratio
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 20
422 Key Operating and Financial Highlights ndash Group
Financial Performance 2007 2008 2009 2010 2011 Growth
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 21
Lease and Term loans disbursed
Housing finance disbursement
Short term finance portfolio
Lease Finance
Real estate finance assets
Total assets
Long term liabilities
Term deposit balance
Net current assets
2977
1255
213
4571
3065
15056
11103
8257
1401
3412
1612
336
4734
3915
17342
12115
8249
1559
3750
1839
317
4383
4789
22681
18792
9780
3645
4345
2121
468
4107
5605
26930
21745
12373
4172
8517
2586
821
4547
6979
31165
25299
16828
3676
9603
2190
7561
1072
2452
1572
1634
3601
-1188
Operational Performance
Operational income
Operational expenses
Financial expenses
Profit before tax
Net profit after tax
Average effective tax rate
883
272
1246
475
303
3608
1179
352
1553
708
406
4257
1913
490
1687
1273
822
3546
3047
966
1822
1956
1327
3216
2160
913
2364
1217
500
5888
-2911
-543
2976
-3781
-6230
8308
Financial Ratio
Debt equity ratio (Times)
Financial expenses coverage ratio (Times)
Current ratio (Times)
Return on total assets ()
Nonperforming loan ratio ()
Return on shareholdersrsquo equity ()
Earnings per share (BDT)
Dividend per share
Price earnings ratio (Times)
Dividend yield ()
Dividend payout ratio ()
954
138
1201
237
596
2759
306
400
4963
263
2640
832
146
1211
250
397
2843
410
350
5576
153
2155
848
175
1041
411
343
4105
830
1100
4460
297
4014
630
207
1391
535
284
4364
1341
1000
3467
215
4521
683
151
1311
172
232
1304
505
250
2741
181
4947
844
-2696
-008
-363
-052
-3060
-6230
-7500
-2096
-034
426
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 22
423 Non performing lone Ratio
NPL is the nonperforming loans ratio Analysts use this ratio to compare lenders If a lender
has a high NPL ratio the lender will have difficulties with cash flows This is because many
of the loans the company holds have a high probability of not being paid back If a lender
does not receive a return of his principal on the loan he will lose money The higher the
NPL the more likely this happens
Formula
Divide by the total loan amount to calculate the NPL ratio In the example $10000 divided
by $100000 equals 01 Multiply the decimal by 100 to get 10 percent
Non performing lone Ratio of IDLC Finance (2010) = 284
Equity Statistics
Number of shares (No)
Year end market price per share (BDT)
Net asset value per share (BDT)
Market capitalization
Market value addition
Shareholders equity
2000000
151900
1260
3038
13930
1247
2500000
228900
1628
5723
21262
1611
3000000
370300
2417
11109
34613
2393
6000000
464800
3727
27888
42753
3690
99000000
13850
4021
13712
9829
3980
155000
-9702
787
-5083
-7701
787
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 23
Non performing lone Ratio of IDLC Finance (2011) = 232
424 Debt to equity ratio The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its
total shareholders equity This is a measurement of how much suppliers lenders creditors
and obligors have committed to the company versus what the shareholders have committed
Formula
Debt to equity ratio of IDLC Finance (2010) = 630 Times
Debt to equity ratio of IDLC Finance (2011) = 683 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 24
425 Earnings per share
EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock Earnings per share is calculated as follows
Formula
dingoutsstockcommonofsharesofNumber
rsstockholdecommonforavailableEarningsshareperEarnings
tan
EPS of IDLC Finance BDT (2010) = 1341
EPS of IDLC Finance BDT (2011) = 505
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 25
426 Dividend per share
Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock Dividends per share do not represent the amount of
profit earned per share of stock (EPS) When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding The formula for is
Dividend per share of IDLC Finance (2010) = 1000
Dividend per share of IDLC Finance (2011) = 250
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 26
427 Price Earnings Ratio
The price earnings ratio (PE) is the best known of the investment valuation indicators The
PE ratio has its imperfections but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the PE multiple (ie how many times a stock
is trading (its price) per each dollar of EPS)
Formula
Price Earnings ratio of IDLC Finance (2010) = 3467 Times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 27
Price Earnings ratio of IDLC Finance (2011) = 2741 Times
428 Return on total Assets
Return on Total Assets (ROA) Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets also called the
return on investment (ROI) The return on total assets is calculated as follows
Formula
assetsTotal
rsstockholdecommonforavailableEarningsassetstotalonturn Re
Return on total Assets of IDLC Finance (2010) = 535
Return on total Assets of IDLC Finance (2011) = 172
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 28
429 Return on shareholderrsquos equity
Measures the rate of return the shareholders receive on their investment in your business Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance
Formula
Return on shareholderrsquos equity of IDLC Finance (2010) = 4364
Return on shareholderrsquos equity of IDLC Finance (2011) = 1304
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 29
4210 Current Ratio The current ratio is a popular financial ratio used to test a companys liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities
Formula
Current Ratio Analysis of IDLC Finance (2010) = 1391 times
Current Ratio Analysis of IDLC Finance (2011) = 1311 times
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 30
51 Summary of major findings
511 Non performing lone Ratio
Here we can see that non performing loan ratios are decreasing each year And in 2011 it is
307 which is a good sign for IDLC Finance ltd The ratio of nonperforming loan has been
further reduced from 45 in 2009 and 362 in 2010 to 307 in 2011 mainly through
strengthening of the credit and collections teams and relevant process IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses
512 Debt to equity ratio IDLC finance limited is a strong equity based company Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at ldquoAAArdquo and sort term rating as ldquoST -1rdquo Institution
rating in this category characterized with excellent position As in December 31 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million This means the
company has a strong equity against its debt And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year And that is a good sign for the company to meet its obligation The
companyrsquos equity had increased by 54 over the previous year
513 Earnings per share
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 31
The company believes that superior service diversification of client segment and business strong risk
management performance focus ensuring sustaining financial performance and those results an
increasing rate of earning per share This graph shows every year this rate is increasing Consorted
earning per share grew by 61 to BDT 2218 compared to previous year
514 Dividend per share IDLC finance has been paying dividend consistently to its shareholders over the years But they pay
dividend randomly according to their business policyThis graph highlights their dividend payment
per share Moreover the company has paid 110 in 2010 and 100 in 2011
515 Price earnings ratio Price earnings ratios are 2101 that indicate a good sign for the company We know that lower price
earnings ratio means earring per share is more than the market value of the company In 2011 IDLC
Finance has decreased by 602 against 2010
516 Return on total assets The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years That we
can see on this graph and the annual report of 2011 The ROA increased means the net income also
increased and in 2011 their return on asset is 535 with a growth of 124
517 Shareholderrsquos equity This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010 This table also shows the share holderrsquos equity was in a steady growth
2007 to 2008 And the growth rate 2008 to 2009 was reduced against 2007 to 2008 But from 2009 it
is again with positive growth
518 Current Ratio The current ratio of IDLC finance in 2011 is 1391 with a growth of 35 times IDLC has a optimum
current ratio over the last few years It means the company has the ability to face its short term
liabilities successfully with their short term asset
52 Recommendations
521 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment The
competition for them is even more challenging as they have to compete with banks Given
the changes in the business environment the need for product diversification is very
important The remaining part concentrates mainly on term financing and housing finance
Investment banks should venture into diversified use of their funds such as investment
banking venture capital financing factoring etc for a healthy growth of the capital
market
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 32
522 ENHANCING CAPITAL MARKET ACTIVITIES Investment banks around the world carry out a significant role in the development of the
capital market Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country The success of investment banking
operations is largely linked to the development of the security market
523 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES In addition to portfolio management which is the core services offered by the investment
banks in our country there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors
If we consider the level of grasp of the knowledge of our population then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others if not prove out to be a major differentiating factor
Not only can that educating the clients also open up new dimensions to do business with
the clients by creating demands in them Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countryrsquos perspective but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold So the quicker investment banks
address this issue the better it may prove out for them
524 Operating income
Above table shows in Each year their operating income growth increased rapidly In 2011
operating revenue grew 58 to reach BDT 3027 million against the year 2011Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011 here the growth is 58 but the previous year growth is 62
which indicated that the operating expenses also increased So the company should try to
reduce their operating cost expenses
525 Total asset
IDLC consolidated asset at 2011 year end stood at BDT 269 billion a 19 growth over
2010 An aggressive deposit program was initiated in the second half of 2011 and by year
end So from the above table I can say they has a optimum level of assetThat means they
have the ability to meet its long term as well as short term obligations with adequate asset
526 Profit
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 33
In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 5365 percent over thepreceding
year After having made necessary provisions for loans and advances accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
6147 percent
527 Shareholderrsquos equity
This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010 This table also shows the share
holderrsquos equity was in a steady growth 2007 to 2008 And the growth rate 2008 to 2009
was reduced against 2007 to 2008 But from 2009 it is again with positive growth
528 Major Risks at IDLC Major risks that IDLC identifies detrimental to its return and
market reputation is as follows
528 1Credit Risk Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task Given the fast changing dynamic global
economy and the increasing pressure of globalization liberalization and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes At IDLC credit risk may arise in the following
forms
Default risk Exposure risk Recovery risk Country party risk Related party risk
Legal risk Political risk
528 2 Market Risk
Market risk refers to the risk of fluctuation in a variety of markets such as interest rates
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses
528 3 Liquidity Risk
Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders This arises from the adverse mismatch of maturities of assets and liabilities
528 4 Operational Risk
Operational risk is the potential loss arising from a break down in companyrsquos system and
producers internal control compliance requirements or corporate governance practices that
results in human error fraud failure damage of reputations delay to perform or compromise
of the companyrsquos interests by employees
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 34
53 Concluding
The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition product development shift in marketing strategy
deregulation amp globalization on the one hand and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system
Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy It is a process to have the goal of
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 35
strategy implementation In this process senior management selects a series of measures that
best represent the organizationrsquos strategy
The current report aimed at critically examining the Institution Analysis of a private financial
institution The main objective of this report was to Institution of financial analysis of IDLC
finance ltd along with how efficiently are providing services to its customer From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory
61 BIBLIOGRAPHY
1 Annual Report from 2011 and 2010
2 Web Site of IDLC-Retrieve from wwwidlccom
3 Financial institution - Wikipedia the free encyclopedia
4 Brochures of IDLC Finance Limited
5 wwwinvestopediacomtermsffinancialinstitutionasp
6 Financial Institutions of Bangladesh - Travel One BD
7 Banks in Bangladesh List of Financial Institutes in Bangladesh
8 Non-bank financial institution - Wikipedia the free encyclopedia
9 httpwwwassignmentpointcomtaginternship-report
10 The_IDLC_Group_Corporate_Profile pdf
11 Non-Bank Financial Institutions - World Bank
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
Southeast University
Term paper on Financial Institutions Analysis of IDLC Finance Page 36
12 Financial and Private Sector Development - Non-Bank - World Bank
13 Analysis of Financial Institutions - Financial Training Course
14 Credit Analysis of Financial Institutions Second Edition - Waylon
15 wwwkesdeecompdffinancialanalysispdf
16 rouoweduaucgiviewcontentcgiarticle=1030ampcontext
17 Financial institution Financial Statement Analysis
18Fundamentals of Bank Financial Statement Analysis
19Bank Financial Statement Analysis amp Ratio Analysis
20rouoweduaucgiviewcontentcgiarticle=1029ampcontext
21Credit Analysis of Financial Institutions Second Edition ndash Waymond
62APPENDIX
621 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission
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