Term Paper ON

Technological Services and Banks Performance

Course: Management of commercial banks services (FIN380) Spring 2012

Section: 1 Group: 3

Submitted To Quazi Sagota Samina Senior Lecturer Department of Business Administration East West University

Submitted By Name Farzana Ahmed Md.Mehedi Hasan Md.Nazmul Hasan Bhuyan Noman-Al-Mamun Nahil Salahuddin

ID 2008-2-10-029 2009-3-10-076 2009-3-10-022 2010-1-10-009 2010-1-10-075

Date of Submission: April 1, 2012

Letter of Transmittal April 1, 2012 Quazi Sagota Samina Senior Lecturer Department of Business Administration East West University 43, Mohakhali C/A, Dhaka-1212, Bangladesh

Subject: Submission of report on Technological Services and Banks Performance Dear Madam: We are very pleased to submit this term paper on Technological services and banks performance of Marcantile bank ltd, Mutual trust bank ltd, National Bank ltd, NCC bank ltd, One bank ltd, and Prime bank ltd,as you have authorized us. We are honored to prepare this term paper under your guidance since it gave us the opportunity to know the current technological products of this six commercial banks and analyze its with business performance .

We tried our level best to accumulate the information for you as comprehensive as possible. We will be obliged to provide further clarification on this report whenever necessary.

Sincerely yours,

Farzana Ahmed Md. Mehedi Hasan Md. Nazmul Hasan Bhuyan Noman-Al-Mamun Nahil Salahuddin

[2008-2-10-029] [2009-3-10-076] [2009-3-10-022] [2010-1-10-009] [2010-1-10-075]

________________ ________________ ________________ ________________ ________________

Acknowledgement
First of all we want to thank the Almighty Allah. We would like to thank our honorable course instructor Ms. Quazi Sagota Samina, Senior Lecturer, Department of Business Administration, East West University (EWU); who helped us through her sound guidance. With her inexhaustible guidance, valuable advice, continuous inspiration, constructive criticism and generosity she helped us to carry out this report successfully.

Finally, we would like to thank to all group members that directly or indirectly helped us to provide and accumulate all the necessary information for the accomplishment of this term paper.

Table of Content

Serial no.
1 2 3 4 5 6 7 8 9 10 11 12

Topic
Executive Summary Introduction Description Of Technological Product Information Of Mercantile Bank ltd Information Of Mutual Trust Bank ltd Information Of National Bank ltd Information Of NCC Bank Ltd Information of One Bank ltd Information of Prime Bank ltd Analysis The Correlation & Analysis Conclusion

Page No.
6 7-8 8-10 11-12 13-14 15-16 17-18 19-20 21-22 23 24-27 28

Executive Summary

The report is on Analysis of Technological Services and Banks Performance. In this particular report we tried to focus on the current technological products and services offered by six of the well renowned banks of Bangladesh. The banks are Mutual Trust Bank; One Bank Ltd; Trust Bank Ltd.; Prime Bank Ltd.; National Commerce and Credit Bank & National Bank Ltd. The technological services are credit card, debit card, SMS banking, mobile banking, internet banking, foreign remittance and money transfer facilities. After making list of each of the technological services we calculated return on asset (ROA), return on equity (ROE) & earning per share (EPS) of each bank. Total deposit, total loan and total asset amount of the banks were collected from the corresponding banks balance sheet. After gathering all these information, we made data input in SPSS software for statistical analysis. From there the correlation coefficient between technological products and each of the six variables were calculated separately. These correlation coefficients helped us to understand the real scenario better than what we study in books. In real world the scenario is very much different from what is expected. On these findings we had drawn attention to many aspects of the company. The term paper contains details of individual finding along with analysis of the scenario.

Introduction
Objectives of the Study There are some objectives behind every study and our work is not an exception. So we also have some objectives. The relevant objectives are listed below. Primary: It is actually a broad objective andour primary objective is the impact of technological products on the performance of commercial bank.

Secondary: The secondary objectives of this study are: To present the deposits and loans of different banks and technological products thar are provided by the commercial bank. To do correlation coefficient analysis with among total asset, total deposit, total loan, ROA, ROE and EPS To provide suggestions whether technological products is affected total asset, total deposit, total loan, ROA, ROE and EPS

Sources of Data and Methodology Methodology of the study means the sources of collecting data to conduct our term paper. While doing our term paper we have used secondary type of data.

Secondary data: We have collected all the required data from secondary sources, like banks websites, banks financial reports on their website to prepare the report.

Limitations While preparing this report, the following limitations are faced: Through, there are available resources to know about the products of those banks but no or very few written documents are available for the operating procedures. Hence a scarcity of secondary sources prevailed in this case.

There was some time constraint, as the report has to be submitted within 20 days duration of the semester. Some parts are not discussed very briefly.

Description of Technological Products

ATM An automated teller machine or automatic teller machine (ATM), is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart card with a chip, that contains a unique card number and some security information . Authentication is provided by the customer entering a personal identification number (PIN). Using an ATM, customers can access their bank accounts in order to

make cash withdrawals, debit card cash advances, and check their account balances.

Credit Card A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services.[1] The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. Card holder may enjoy interest free credit for a particular period, from the date of transaction and it should be predetermined by the bank.

Debit Card An electronic card issued by a bank which allows bank clients access to their account to withdraw cash or pay for goods and services. This removes the need for bank clients to go to the bank to remove cash from their account as they can now just go to an ATM or pay electronically at merchant locations. This type of card, as a form of payment, also removes the need for checks as the debit card immediately transfers money from the client's account to the business account.

SMS Banking SMS Banking is a service that allows customers to access their account information via mobile phone. SMS banking services are operated using both push and pull

messages. Push messages are those that the bank chooses to send out to a customer's mobile phone, without the customer initiating a request for the information. Pull messages are those that are initiated by the customer, using a mobile phone, for obtaining information or performing a transaction in the bank account. Mobile Banking Mobile banking is a term used for performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA). The earliest mobile banking services were offered over SMS. With the introduction of the first primitive smart phones with WAP support enabling the use of the web. Mobile banking most often been performed via SMS or the Mobile Web. Online Banking or Internet Banking Online banking (or Internet banking or E-banking) allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or building society. To access a financial institution's online banking facility, a customer having personal Internet access must register with the institution for the service, and set up some for

customer verification. The password for online banking is normally not the same as for telephone banking. Financial institutions now routinely allocate customer numbers whether or not customers intend to access their online banking facility.

Phone Banking Telephone banking is a service provided by a financial institution, which allows its customers to perform some banking transactions over the telephone. Most telephone banking services use an automated phone answering system with phone keypad response or voice recognition capability. To ensure security, the customer must first authenticate through a numeric or verbal password or through security questions asked by a live representative. With the obvious exception of cash withdrawals and deposits, it offers virtually all the features of an automated teller machine: account balance information and list of latest transactions, electronic bill payments, funds transfers between a customer's accounts, etc.

Foreign Remittance through Exchange Houses Our bank has entered into Remittance Arrangement with a good number of Overseas Exchange Companies in different parts of the world to facilitate wage earners to remit their money to Bangladesh. The Bank is also trying to establish its own exchange house aboard to provide better customer services to the expatriates.

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Short Description of Banks Mercantile Bank Limited

Mercantile Bank Limited emerged as a new commercial bank to provide efficient banking services and to contribute socio-economic development of the country. The Bank commenced its operation on June 2, 1999.

The Bank provides a broad range of financial services to its customers and corporate clients. The Board of Directors consists of eminent personalities from the realm of commerce and industries of the country.

Vision Would make finest corporate citizen.

Mission Will become most caring, focused for equitable growth based on diversified deployment of resources, and nevertheless would remain healthy and gainfully profitable Bank.

Objectives

To achieve positive Economic Value Added (EVA) each year. To be market leader in product innovation. To be one of the top three Financial Institutions in Bangladesh in terms of cost efficiency. To be one of the top five Financial Institutions in Bangladesh in terms of market share in all significant market segments we serve. To achieve 20% return on shareholders' equity or more, on average.

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Other Necessary Information: Total Deposit =

Tk. 75,629,140,101

Loan Amount =

Tk. 66,377,700,000

Total Asset =

Tk.87,140,109,470

Return on Asset=

Net Income Total Asset

=1.6 = 4%

Return on Equity=

Net Income Shareholders Equity

=19.8 = 4%

________________
Net Income- Dividend on Preferred stock = Tk. = 41.04 No of Outstanding Shares

Earnings Per Share =

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Mutual Trust Bank

The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a public company limited by shares for carrying out all kinds of banking activities with Authorized Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each. The Company was also issued Certificate for Commencement of Business on the same day and was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act 1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under the provisions of the Banking Companies Act 1991, the Company started its banking operation and entitled to carry out the banking business.

Mission We aspire to be the most admired financial institution in the country, recognized as a dynamic, innovative and client focused company, that offers an array of products and services in the search for excellence and to create an impressive economic value.

Vision Mutual Trust Bank's vision is based on a philosophy known as MTB3V. We envision MTB to be: One of the Best Performing Banks in Bangladesh The Bank of Choice A Truly World-class Bank

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Other Necessary Information: Total Deposit =

Tk.45,846,309,207 Tk.37,730,458,690

Loan Amount =

Total Asset =

Tk.56,457,442,436

Return on Asset =

Net Income Total Asset

=1.34%

Return on Equity =

Net Income Shareholders Equity

=18.22%

________________
Earning Per Share =
Net Income- Dividend on Preferred stock No of Outstanding Shares

= Tk.35.63

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National Bank Limited

Limited has its prosperous past, glorious present, prospective future and under processing projects and activities. Established as the first private sector bank fully owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after facing many stress and strain. The members of the board of directors are creative businessmen and leading industrialists of the country. To keep pace with time and in harmony with national and international economic activities and for rendering all modern services, NBL, as a financial institution, automated all its branches with computer networks in accordance with the competitive commercial demand of time. Moreover, considering its forth-coming future, the infrastructure of the Bank has been rearranging. Mission Efforts for expansion of our activities at home and abroad by adding new dimensions to our banking services are being continued unabated. Alongside, we are also putting highest priority in ensuring transparency, account ability, improved clientele service as well as to our commitment to serve the society through which we want to get closer and closer to the people of all strata.

Vision

Ensuring highest standard of clientele services through best application of latest information technology, making due contribution to the national economy and establishing ourselves firmly at home and abroad as a front ranking bank of the country are our cherished vision.

15

Other Necessary Information: Total Deposit =

Tk.102362601707

Loan Amount =

Tk.89516598077

Total Asset =

Tk.132497758212
Net Income Total Asset

Return on Asset =

=5.80%

Return on Equity =

Net Income Shareholders Equity

=35.90%

________________
Earning Per Share =
Net Income- Dividend on Preferred stock No of Outstanding Shares

= Tk.15.55

16

National Credit and Commerce Bank

National Credit and Commerce Bank Ltd. bears a unique history of its own. The organization started its journey in the financial sector of the country as an investment company back in 1985. The aim of the company was to mobilize resources from within and invest them in such way so as to develop country's Industrial and Trade Sector and playing a catalyst role in the formation of capital market as well. Its membership with the browse helped the company to a great extent in these regard. The company operated up to 1992 with 16 branches and thereafter with the permission of the Central Bank converted into a full fledged private commercial Bank in 1993 with paid up capital of Tk. 39.00 crore to serve the nation from a broader platform. Mission To mobilize financial resources from within and abroad to contribute in Agriculture's, Industry & Socio-economic development of the country and to play a catalytic role in the formation of capital market. Vision To become the Bank of choice in serving the Nation as a progressive and Socially Responsible financial institution by bringing credit & commerce together for profit and sustainable growth.

17

Other Necessary Information: Total Deposit =

Tk.67961244777

Loan Amount =

Tk.63,230,141,628

Total Asset =

Tk.83,554,177,553

Return on Asset =

Net Income Total Asset Net Income Shareholders Equity

=2.80%

Return on Equity =

=25.35%

________________
Earning Per Share =
Net Income- Dividend on Preferred stock No of Outstanding Shares

= Tk.5.33

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ONE BANK LTD

ONE Bank Limited was incorporated in May, 1999 With the Registrar of Joint Stock Companies

under the Companies Act. 1994, as a commercial bank in the private sector. The Bank is pledge-bound to serve the customers and the community with utmost dedication. The prime focus is on efficiency, transparency, precision and motivation with the spirit and conviction to excel as ONE Bank in both value and image.

The name 'ONE Bank' is derived from the insight and long nourished feelings of the promoters to reach out to the people of all walks of life and progress together towards prosperity in a spirit of oneness.

Vision To establish ONE Bank Limited as a Role Model in the Banking Sector of Bangladesh. To meet the needs of our Customers, Provide fulfillment for our People and create Shareholder Value.

Mission To constantly seek to better serve our Customers. Be pro-active in fulfilling our Social Responsibilities. To review all business lines regularly and develop the Best Practices in the industry. Working environment to be supportive of Teamwork, enabling the Employees to perform to the very best of their abilities.

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Other Necessary Information: Total Deposit =

Tk.50873707749

Loan Amount =

Tk.42,190,397,165

Total Asset =

Tk.58,704,871,408

Return on Asset =

Net Income Total Asset

=3.22%

Return on Equity =

Net Income Shareholders Equity

=38.80%

________________
Earning Per Share =
Net Income- Dividend on Preferred stock No of Outstanding Shares

= Tk.91.75

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Prime

BankLimited

Prime Bank was created and commencement of business started on 17th April 1995. The sponsors are reputed personalities in the field of trade and commerce and their stake ranges from shipping to textile and finance to energy etc. As a fully licensed commercial bank, Prime Bank is being managed by a highly professional and dedicated team with long experience in banking. They constantly focus on understanding and anticipating customer needs. As the banking scenario undergoes changes so is the bank and it repositions itself in the changed market condition.

In 1999 they became public limited company and enlisted themselves in the Chittagong Stock Exchange Limited. In 2000 they enlisted with Dhaka Stock Exchange Limited and started trading in both the exchanges. From 2008 they started to develop technically by introducing ATM and finally in 2011 they introduced Prime Exchange Co. Pte. Ltd. (Jurong East Branch).

Vision To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital
adequacy, asset quality, sound management and profitability having strong liquidity.

To build Prime Bank Limited into an efficient, market-driven, customer focused institution Mission with good corporate governance structure.

21

Other Necessary Information: Total Deposit =

Tk.124518628582

Loan Amount =

Tk.111,167,388,892

Total Asset =

Tk.152,796,945,827

Return on Asset =

Net Income Total Asset

=1.97%

Return on Equity =

Net Income Shareholders Equity

=17.91%

________________
Earning Per Share =
Net Income- Dividend on Preferred stock No of Outstanding Shares

= Tk.5.69

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Analysis
Serial Bank no Name No. of Total Technol (TK.) ogical Product
10

Deposit Total (TK.)

Loan Total Asset (TK.)

ROA(%)

ROE(%) EPS (TK.)

4 5 6

Mercantile Bank Limited Mutual Trust Bank Limited National Bank Limited NCC Bank limited One Bank Limited Prime Bank Limited

75,629,140,101

66,377,700,000

87,140,109,470

1.64

19.8

41.04

45,846,309,207

37,730,458,690

56,457,442,436

1.34

18.2

35.63

102,362,601,707

89,516,598,077

1.32498E+11

5.8

35.9

15.55

5 5 9

67,961,244,777 50,873,707,749 124,518,628,582

63,230,141,628 42,190,397,165 111,167,388,892

83,554,177,553 58,704,871,408 152,796,945,827

2.8 3.22 1.97

25.4 38.8 17.9

5.33 91.75 5.69

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The Correlation and analysis

The correlation between:
Number of Technological Products and Total Deposit:

Correlations
a Corre lations

PRODUCTS DEPOSIT

Pearson Correlation Sig. (2-tailed) Pearson Correlation Sig. (2-tailed)

PRODUCTS 1.000 . .396 .437

DEPOSIT .396 .437 1.000 .

a. Listw ise N=6

The correlation between technological products and total deposit of the banks is 0.396. This means the two variables are 39.6 % positively correlated. Therefore, from the data we can say that with one unit increase in technological products there will be 39.6 % increase in total deposit amount of the banks. This is positive for the banks future even though their liability increases. Deposit is liability for the bank. But with deposit the cash inflow increases, with which the bank can grab opportunity of future investment in profitable projects and increase their profit.

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Number of Technological Products and Total Loan:

a Corre lations

PRODUCTS LOAN

Pearson Correlation Sig. (2-tailed) Pearson Correlation Sig. (2-tailed)

PRODUCTS 1.000 . .399 .433

LOAN .399 .433 1.000 .

a. Listw ise N=6

The correlation between technological products and total loan amount of the banks is 0.399. This means the two variables are 39.9 % positively correlated. Therefore, from the data we can say that with one unit increase in technological products there will be 39.9 % increase in total loan amount of the banks. This is again positive for the banks future as loan is asset for the banks.

Number of Technological Products and Total Assets:

a Corre lations

PRODUCTS ASSET

Pearson Correlation Sig. (2-tailed) Pearson Correlation Sig. (2-tailed)

PRODUCTS 1.000 . .310 .549

ASSET .310 .549 1.000 .

a. Listw ise N=6

The correlation between technological products and total asset of the banks is 0.310. This means the two variables are 31.0% positively correlated. Therefore, from the data we can say that with one unit increase in technological products there will be 31.0% increase in total asset amount of the banks. This is again positive for the banks future as the banks asset part increases so does its strength to face any future losses.

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Number of Technological Products and ROA:

a Corre lations

PRODUCTS ROA

Pearson Correlation Sig. (2-tailed) Pearson Correlation Sig. (2-tailed)

PRODUCTS 1.000 . -.591 .217

ROA -.591 .217 1.000 .

a. Listw ise N=6

The correlation between technological products and return on asset of the banks is -0.591. This means the two variables are 59.1% negatively correlated. The correlation is strongly negative. Therefore, from the data we can say that with one unit increase in technological products there will be 59.1% decrease in return on asset of the banks. This scenario is extremely different from expected. With increase in technological products there was supposed to be increase in return on asset. The purpose of increase in technological product is to make the banks function smooth and easier for the customer to access the services. With technological development there comes a huge risk which the bank should consider. Although there are many factors behind return on asset yet one is the technological development of the bank. In this case we can see that the before technologically expanding the business the banks should consider all factors and then decide on further expansion.

Number of Technological Products and ROE:

a Corre lations

PRODUCTS ROE

Pearson Correlation Sig. (2-tailed) Pearson Correlation Sig. (2-tailed)

PRODUCTS 1.000 . -.632 .178

ROE -.632 .178 1.000 .

a. Listw ise N=6

The correlation between technological products and return on equity of the banks is -0.632. This means the two variables are 63.2% negatively correlated. The correlation is strongly negative.

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Therefore, from the data we can say that with one unit decrease in technological products there will be 63.2% decrease in return on equity of the banks. This scenario is once again extremely different from expected. Like return on asset, with increase in technological products there was supposed to be increase in return on equity but the opposite is happening. This again indicates the bank should strongly analyze their equity position and impact on equity due to introduction of technological products.

Number of Technological Products and EPS:

a Corre lations

PRODUCTS EPS

Pearson Correlation Sig. (2-tailed) Pearson Correlation Sig. (2-tailed)

PRODUCTS 1.000 . -.116 .826

EPS -.116 .826 1.000 .

a. Listw ise N=6

The correlation between technological products and earnings per share of the banks is -0.116. This means the two variables are 11.6% negatively correlated. The correlation is moderately negative. Therefore, from the data we can say that with one unit decrease in technological products there will be 11.6% decrease in earnings per share of the banks. This scenario is once again extremely different from expected. With increase in technological products there was supposed to be increase in earnings per share but the opposite is happening. As we know, EPS= net income/ number of shares outstanding. Therefore there is a high possibility that increase in these products is negatively effecting the net income of the bank. It may be decreasing the annual net income. This again indicates the bank should strongly analyze their net income position and impact on net income due to introduction of technological products.

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Conclusion

At the end it is found that, the all banks are using technological products. Here we correlated all other elements like Total Asset, Total Deposit, Total Loan, EPS, and ROA & ROE with the technological products of Six Banks. The correlation between technological products and total deposit of the banks is 0.396. This means the two variables are 39.6 % positively correlated. The correlation between technological products and total loan amount of the banks is 0.399. This means the two variables are 39.9 % positively correlated. The correlation between technological products and total asset of the banks is 0.310. This means the two variables are 31.0% positively correlated. The correlation between technological products and return on asset of the banks is 0.591. This means the two variables are 59.1% negatively correlated. The correlation between technological products and return on equity of the banks is -0.632. This means the two variables are 63.2% negatively correlated. The correlation between technological products and earnings per share of the banks is -0.116. This means the two variables are 11.6% negatively correlated. So, it is clear picture that banks have some positive and negative correlations between them.

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