Chapter-28 SECTOR WISE PERFORMANCE OF LOAN

Although the type of loans are defied in this report, but the brad category of loan that is submitted
to the Bangladesh Bank for review and report is given below:
Large and medium scale industrial loan: This loan consists of the entire loan that comprises of
the long-term project loan like infrastructure, building, factory etc. This is the type of loan that SBL
has not given in large quantity because of the default nature of this type of loan and the problem
of recovery. But even then the amount of money that has been given in this loan is quiet large as
each investment carries huge amount of investment. On an average the percentage of term loan
given away is approximately 11% of the total loan portfolio. Other Private commercial Bank (PCB)
percentage of term loan is approximately 15% of the total portfolio which shows that SBL is in the
lower side and this is one reason why its classified loan is low.
Working Capital Loan (WCL): SBL has been encouraging in giving Working Capital Loan in
recent times as it is generally of short nature and the default nature is low in this case. It can be
seen that the percentage of WCL of the total credit portfolio is increasing gradually. One reason
for this must be also that the demand for WCL in recent times is very high and every bank is
trying to provide WCL. The average percentage of WCL for the last few years is approximately
4.5% of the total credit given away by SBL.
Export Credit: Export credit has always been the priority of some of the nationalized banks in
Bangladesh along with some first generation banks. But recent trends show that export credit has
been going down for some times and the reason may be that the world business environment is
not very stable. SBL has been offering export credit from the beginning and it didnt vary much
during from the start of its business. On an average, it has been giving approximately 1.5% of the
total credit in export finance.
Commercial Credit: The credit that every bank provides the most and which brings the highest
income is the commercial credit. This is the most because the demand for commercial credit is
the highest among the entire loans. SBLs highest percentage of loan amount all the credits is
commercial loan which on an average is approximately 63% of the total loan. It comprises of
more than half of the total portfolio. The industry also has approximately 50-65% of its loan
concentrated towards different types of commercial loans.

Small and Cottage Industry: This sector in Bangladesh is not very prominent and still in the
growing phase. PCBs dont concentrate much in this sector as a result the industry on an
average has approximately 1-2% of the total loan in small and cottage industry. SBL in
comparison with the industry has only 0.03% of the loan concentrated to this sector which is the
lowest among all the credit offered.
From the trend analysis over the last four years, it can be seen that the amount of each loan is
increasing gradually but commercial loan and other loan is increasing is a very good pace. This is
a good sign for SBL in the sense that growth rate of most of the loan is good which means that
SBL is getting more and more clients which will help it to generate higher operating income.
Chapter-29 Classified Loans:
A classified loan or commitment is one which is classified as substandard, doubtful and loss as
per policy of loan classification set by Bangladesh Bank or Head Office of the Bank.
Substandard: A well-defined weakness is present in loans of this category which could affect the
ability of the borrower to repay. This is clearly a troubled situation for one reason or another that
requires immediate and intensive effort to correct and reduce the possibility of loss.
Substandard loan position was increasing during the year 1999, then it fell in 2000 after that it
again increased in 2001 and then in the last year it fell sharply again and it is projected that it will
continue to be in the lower end which is very good for the Bank.
Doubtful: A serious doubt must exist that full repayment will not be forthcoming but the exact
amount of the loss cannot be ascertained at the time of classification.
The last four years trend shows that the amount of doubtful loan is falling gradually and in a
uniform manner which is a very good sign for the Bank. The average doubtful loan over the four
years period is approximately 0.40 % of the total loan portfolio which is very nominal.
Loss: Advances or portions of advances which are determined to be uncollectible based on
presently known situation/factors.

Although the amount of bad loan is in a very gradual increasing trend, it is balanced with the
other two type of classified loan. It can be further seen that the percentage of bad loan of the total
loan portfolio is decreasing gradually which is quiet good.
Although the amount of total loan has been slowly increasing, it is seen that the percentage of
classified loan over the past 4 years has been gradually decreasing. The industry on an average
has a classified loan of nearly 10-20 %. Among these the private commercial banks classified
loan position stands nearly about 6-10% while the position of the nationalized banks has a
classified loan position of about 35-40% which sometimes before increased to nearly 60%. This
shows classified loan position in the industry is quiet high but in comparison to the industry and
other PCBs, the position of SBL is on the better side of the spectrum.
It can further seen that the percentage of unclassified loan is gradually increasing while it was
already found out that the percentage of classified loan is decreasing. It does creates a balance
between the two and as a result it can be concluded that SBL is doing quiet from the view point of
Classified loan.
Chapter-30 SECTOR WISE RECOVERY OF LOAN
Term Loan: Although the recovery of term loan is very slow but it is gradually increasing due to
good loan recovery management present in Southeast bank Limited. For the last four the
recovery is taking place in a stable manner with uniform growth which is a good sign as recovery
of term loan is not very easy and default is very much in this sector. But it is the characteristics of
long-term loan that recovery will be a very slow process. On an average the total recovery of term
loan in each year is about Tk. 635 million. This recovery is quiet good if compared with the
industry. The recovery of large and medium industry credit is about 450 million every year.
Working Capital Loan: According to the information, SBL during the year 1999 and 2000 did not
recovered any WCL. But from the year 2001, it began to recover the loan given in this sector
which is increasing. But if compared with the industry, its recovery is slow because the industry
has an average recovery of almost Tk.200 million each year whereas SBL has a yearly recovery
of only Tk.147 million. This is a concerned for the Management but as the amount of loan given in
this sector is not very large, they are not in a hurry.
Export Loan: The recovery of export loan in the year 1999 and 2000 was quiet stable and
growing but from 2001 the recovery jumped sharply which is a good sign for SBL. The export

loan recovery every year is approximately Tk.1083 million which is pretty good and it is quiet the
same as the industry whose average recovery every year is about Tk.1100 million. SBL is
predicting that its export loan growth will increase and as a result, the recovery of loan has to be
very effective in order to survive in the industry.
Commercial Credit: As the commercial credit comprises of the majority amount of loan in the total
loan portfolio and is most important as it gives the highest earnings so its recovery is also very
important because classified loan is most in this sector in SBL. The commercial loan recovery is
increasing in a good speed although there are defaults. On an average the recovery of
commercial loan every year is close to Tk.2550 million, whereas the industry has a recovery of
approximately Tk.2200-2800 million on an average. So SBL is within the industry line.
Small and Cottage Credit: The small and cottage industry sector is pretty low in Bangladesh and
loans provided in this sector are also in the lower end. As the percentage of loan allocated in this
sector is very nominal, the recovery is also very small and another reason behind the little
recovery is that SBL doesnt concentrate much is this sector. The average recovery of loan in this
sector is about Tk.0.89 million per year.
Others Loans: The second most large loan portfolio that makes up the portfolio of SBL is rest of
the loans except the above and so its recovery is as much as important as the loan is. The
recovery exactly represents the growth of loan of this sector. During 1999 and 2000, the loan was
not so huge but then from the next year it climbed sharply. The loan recovery of this sector is also
behaving in the same manner as the loan growth. On an average, the recovery of this loan is
close to Tk.16542 million.
The comparison between the loan shows that the highest recovery loan sector is the Commercial
sector after which is the other loans. Although the recovery of the other loan sector is falling, the
rest almost have the same kind of recovery but the most important point is that all the recovery is
in the increasing phase which is a good positive sign for the Bank.
The loan recovery trend in the last four years show that recovery is quiet good. Although the best
recovery was in the year 2001, last year the recovery was also good but it was in the lower side
and growing slowly.
This is one of the most important and crucial sections of the Bank where it has to work in order to
recover the loan that it has disbursed to its clients and are still outstanding.