Mentors: Students:

Velid Efendić, Ph.D. Nermin Džajić 73622

Anes Prentić, Ms.C. Haris Fadžan 72460
Tarik Hajdarpašić 73623
Subject:
Idna Mulamehić 73459
Bank Management
 Intoduction
• Founded on July 13, 1999 in Sarajevo, Bosnia and Herzegovina by higher-class citizens
• Currently, the bank has offices in all of the major cities in Bosnia and Herzegovina
(Sarajevo, Mostar, Banja Luka, Tuzla, Zenica, Foča, Sanski Most, Konjic, Visoko and
Višegrad).
• Management includes: Chief Executive Officer (N. Dž.) , Chief Financial Officer (T. H.) ,
Chief Risk Assesment Officer (I.M.) and Marketing Manager (H. F.)
• Built its business around the principles set by the modern marketing approach to doing
business, in combination with a high level of corporate social responsibility
• Involved in many governmental and non-governmental initiatives throughout the years
of its existance, ranging from donations for feeding the poor and improvement of
education, to larger projects
 Intoduction cont.
• Established a reputation of a 'friend' to the client: a reliable and resourceful partner ready
to finance any personal or business venture
• Initial goal is the stabilization of the economic growth of the country for the purpose of
raising the life standard, purchasing power of the population, and the marginal
propensity to save
• Striving to achieve the revitalization of the society in Bosnia and Herzegovina
• Smart Fund‘s phylosophy is 'Nurturing Progress.'
Bank Logo
• Current logo of the Smart Fund brand was carefully designed, and the message it
is trying to send is: The only way to earn funds is a smart investment
• The letter 'S', standing for 'Smart', surrounding the white letter 'F' in the center of
the logo the white letter 'F', standing for 'Funds', in the center of the logo
• The blue and red colors chosen for the letter 'S' state that smart investment
means achieving a balance between safety (blue) and risk-taking (red)
Bank Logo cont.
• The logo should emphasize the brand values of the Smart Fund d.d.:
1. Security, trust and tradition, all of which are important to establish our
reputation as reliable partneres for both employees and clients,
2. Solid, crisis-resistent business model of a strong and successful bank,
3. Economically successful concept that follows the principles of social
responsibility
Our vision
• Our vision is to :
„Become the leading investing and funding institution in the
country, by building an image of the most reliable, stable and
trusted investing and funding partner available on the market “
Our objective
• Smart Fund d.d. has one strategic objective:
„To stimulate the economic growth of Bosnia and
Herzegovina to a degree that will lead it to become a
concurrent economic force in the European market by 2050“
Our mission
• Our mission is:
„Maximization of the utility of our stakeholders by competently
and constantly improving our services“
Our values
• Our values include:
1. Responsibility
2. Reliability
3. Innovativeness
4. Adaptibility
5. Fairness
6. Safety
Company‘s goals
• A minimum of 50% yearly market value growth,
• An increase in a Price per share to $ 81,76 in a three-year period,
• Maintaining the Current Net income per quarter higher than $ 500.000,00
• Maintaining the ROA above 0,05%
• Maintaining the ROE above 1%
• Maintaining the NIM above 0,90%
THE OVERALL SIMULATION
Initial remarks and overall information
• The ProBanker software offered no information on the market in the initial
quarter so we chose not to change the default variables, in order to 'test the
market‘
• Since the majority of our competitors chose to act and modify the
aforementioned variables, with limited information available, we were able to get
a head start, and had the potential to remain the market leader
• However, our prirority in the medium-term was stability. Our strategy of becoming
a market leader is a long process, and maintaining the trust of the market was our
3-year goal.
Net income per quarter
Maintaining the Current Net income per quarter higher than $ 500.000,00

Q1 Q2 Q3 Q4 Q5 Q6

1.554.220,00 1.591.260,00 181.020,00 -860.970,00 1.552.080,00 206.270,00

Q7 Q8 Q9 Q10 Q11 Q12

-1.884.050,00 665.770,00 807.260,00 1.587.090,00 2.096.950,00 /

 Game start and Quarter 1
• As aforementioned, since the information about the market was scarce, we have
decided that the first thing that needs to be done is to test the market
• As a consequence of the cautious approach, Smart Fund d.d. was one of two banks on
the market that did not have to activate the discount window option with the central
bank
• We became the market leader in this quarter, considering the income per quarter
• The majority of sources of funding were the retail CDs, which amounted to $
256.416.940,00 or 28,29% of the total liabilities structure of the company balance sheet
• These sources of funding were used mostly for financing mortgages, which in the first
quarter amounted to $ 256.416.100,00 or 25,66% of the total asset structure at the
time
 Quarter 2
• After the first simulation, we were able to conduct comparative analysis of the
competition and conduct analysis of the different scenarios that would take place if
different decisions were made
• Our success in the first quarter gave us confidence and we wanted to increase earnings
even further by increasing the number of our loan-taking clients
• In this quarter we have reduced the interest rates on different offered loans
• We were aware that changes of these rates need to be gradual, so that a long-term
problem of loss of the public trust could be avoided
• The result was an additional raise of all the indicators we have chosen to be our
reference for business performance evaluation (market value, price per share, net
income per quarter, ROA, ROE and NIM).
Quarter 3: Income Per Quarter Problems
• Due to the advertising efforts of our competitors, and a poor asset-liability
management decision, regarding the sources of funding of our loan program, we
were forced to borrow funds from the central bank (discount window function),
achieved net income was $ 181.020,00
• Asset-liability management policy based on providing the sources of funding
primarily from retail demand and corporate demand deposits was lacking
• Our management was overlly-confident in the loyalty of our current clients,
disregarding the fact that advertising has a significant effect on luring the clients
away, which resulted in a lack of response on such 'client-takeover' threat
Quarter 4: Income Per Quarter Problems
• Since Smart Fund d.d. was forced to borrow funds from the central bank, due to
the poor asset-liability management decisions, in this quarter the management
started looking for ways to make up for the experienced losses
• New strategy was to try and increase the sources of funding through purchases of
federal funds
• Because of poor Total Assets/Net Worth and Retained Earnings leverage ratio of
10,81% in the Quarter 3 led to our disqualification of borrowing funds
• Our inability to borrow funds and accumulate the adequate level of sources of
funding led to an another loan from the central bank, causing Smart Fund d.d. to
experience its first quarterlly loss
Quarter 5
• We were able to recover from the losses achieved in the third and fourth quarter,
by focusing on advertising of retail demand and corporate demand deposits
• During our recovery, we were maintaining the Asset/Net Worth and Retained
Earnings and Risk/Weighted Assets/Net Worth and Retained Earnings leverage
ratios above 12% and 8%, respectively
• This led to a net income $ 1.552.080,00
Quarter 6: Income per Quarter Problems
• To keep up with a positive growth trend, the managment attempted to decrease
the asset side of the balance sheet, by raising up the interest rates on all loans,
while increasing the advertising of deposits to increase the liability side of the
balance sheet
• Due to the efforts of our competition, we have experienced some difficulties in
this quarter
• One major factor of income problems during this quarter was that our leverage
was still in a 'red-zone‘‚
• Confidence of clients in our stability became questionable, because of the
negative results in the past quarter
 Quarter 7: The greatest loss
• Since the 3rd quarter, we have started to face negative trends, unfortunatelly, it
continued in quarters 4, 6 and 7
• Our management has decided on using retail demand deposits and corporate demand
deposits as sources of funding an expanding number of loan-takers
• Problems appeared because:
1. Management disregarded the volatility and risk associated with RDD and CDD's,
arising from the competitive and customer pressure
2. Government was still unwilling to borrow funds to Smart Fund d.d., due to the poor
leverage ratio levels
3. Another taken discount window loan, caused by our inability to fund our loans through
RDD's and CDD's, and our inability to purchase federal funds
Game finale: Quarters 8-11 Income
per Quarter
• We were able to recover from the quarter 7 until the end of the game
• Factors which affected our positive trend were:
1. Minimization of the advertising costs
2. Cancellation of the operating costs charged to customers
3. Increase of RDD's and CDD's in our bank, as a consequence of that cancellation
4. Being one of the two banks that achieved a positive net income in the eight
quarter enabled us to return the confidence of our clients, improve our leverage
ratios, and solidify the sources of funding
Market value growth : Average: +41%
Goal Description Initial Value Reference Value Changes

A minimum of 50% Q0: $ 20.746.970,00 Q4: $ 28.370.770,00 Y1: + 36,75%

yearly market value Q4: $ 28.370.770,00 Q8: $ 24.529.310,00 Y2: - 13,54%
growth Q8: $ 24.529.310,00 Q11: $ 49.003.870,00 Y3: + 99,78%
Average: + 41%
Price per share growth: Total = +136,14%
Goal Description Initial Value Reference Value Changes

An increase in a Price
per share to $ 81,76 Q0: $ 20,75 Q11: $ 49,00 Total: + 136,14%
in a three-year
period,
Return on Assets: Average = 0,062%

Maintaining the ROA above 0,05%

Q1 Q2 Q3 Q4 Q5 Q6

0,15% 0,15% 0,02% -0,08% 0,13% 0,02%

Q7 Q8 Q9 Q10 Q11 Q12

-0,16% 0,06% 0,07% 0,14% 0,18% /

Return on Equity: Average = 0,72%

Maintaining the ROE above 1%

Q1 Q2 Q3 Q4 Q5 Q6
1,69% 1,70% 0,19% -0,91% 1,64% 0,22%
Q7 Q8 Q9 Q10 Q11 Q12
-1,99% 0,71% 0,85% 1,66% 2,15% /
Net interest margin: Average = 1,01%

Maintaining the NIM above 0,90%

Q1 Q2 Q3 Q4 Q5 Q6
1,02% 1,05% 0,79% 0,70% 0,99% 0,78%
Q7 Q8 Q9 Q10 Q11 Q12
0,64% 1,07% 1,27% 1,34% 1,44% /
 Conclusion
• Smart Fund d.d. can be considered as one of the top three banks in the industry,
regardless of the economic indicator you wish to consider
• We have used a combination of already collected knowledge, trial-and-error attempts,
and consultations with the professor team
• We believe that our cautious approach in the beginning, mistakes from over-confident
approach in the mid-game period, and proper use of competitive advantage in the end
have all been lessons to savor
• We now understand the consequences of a superficial approach to doing business in
general, and understand how a mismanagement of both assets and liabilites can have
dire consequences on the company profits