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Introduction
The main product of bank is Loans and Advances. The price of a loan is determined by
the cost to make the loan plus a profit or risk premium on it. Lending is the primary
business of a bank and profit is a measure of its success. So the main objective of
lending is/to earn profit on loans for the ongoing viability of a bank.
According to Michael C. Dennis (2001), most of the banks use objective and subjective
data interpretation to evaluate a borrowers financial condition from their financial
statements. Objective analysis involves traditional methods of number and data analysis.
Such as, review of unusual accounting methods used by the client, unusual information in
the notes in the financial statement. Review of CIB (Credit Information Bureau) Report of
client including financial ratios, trend analysis and financial profitability analysis of his
business has been done before disbursement of a loan.
Home Loan
Any Purpose Loan
(Described in details in the previous part)
Overdraft
Import Financing
Export Financing
Bank Guarantee
4.1.1 Analyze of credit sector wise
%
Sector Caps
Trade and commerce
45%
SME
10%
10%
10%
10%
Agro credit
5%
5%
Others
5%
Total
100%
Source
fund
Equity
Borrowings
Deposit
Others
average
9.25
12.25
71.51
6.99
9.54
9.287
74.45
6.723
8.71
8.67
76.47
6.15
12.063
12.644
70.40
4.892
14.726
11.288
68.766
5.28
10.85
10.815
72.319
6.087
total
100
100
100
100
100
100
Comment: - IT is revealed from the table that deposit variable consumes highest
percentage of fund followed by equity, borrowings and others.
4.1.3
Formula
2010
2011
2012
2013
2014
average
Investment to 9827
8806
5324
3456
5889
deposit=
56425
49190
41573
30092
25734
Investment/tota =17.41
=17.90
=12.81
=11.57% =22.91
=16.52%
l deposit
%
%
%
%
Source: - data have been compiled from annual report of EBL.
Note: - the calculations have been made by the researcher.
Evaluation: - from the table, we see that in 2014 the investment is higher than
other years .EBL constantly invested a little portion of his total deposit.
Formula 2010
2011
2012
2013
2014
Liquid
1806
1931
1294
7821
8984
asset to
deposit
56425
49189
41564
29878
25699
=liquid
=32.01% =39.27% =31.15% =26.17% =34.95%
asset
/total
deposit
Source: - data have been compiled from annual report of EBL.
average
=32.71%
Ratio (%)
2010
134,659,627
18,38,364
0.7834
2011
189,133,546
1,495,844
0.5943
2012
216,456,284
15,36,048
0.4854
2013
246,864,565
10,77,284
0.3106
2014
294,634,661
960,900
0.2399
From the graph we find a decreasing trend in the ratio of classified loans, which mean the
amount of classified loans of EBL are decreasing over the years. It is possible because of
the provisionary and recovery strategies of the bank. The bank is quite aware to hold the
decreasing trend in the next coming year
(Amount in take`000)
Year
Sub standard
Doubtful
Bad/Loss
Total
2010
1,96,861
85,346
15,56,157
1,838,364
2011
23,972
26,875
1,415,021
1,465,868
2012
183,841
90,782
1,261,425
1,536,048
2013
20,617
4,140
10,52,527
10,77,284
2014
8,570
3,184
9,49,146
9,60,900
Findings
Financial institutions must ensure that their credit portfolio is properly administered, that
is, loan agreements are duly prepared, renewal notices are sent systematically and credit
files are regularly updated. An institution may allocate its credit administration function
to a separate department or to designated individuals in credit operations, depending on
the size and complexity of its credit portfolio.