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Comparative Financial Study B-504

Topic

We areMd. Jahir Uddin Palash Irin Sultana Tareq Bin Ziad Tania Tahmina Md. Hasib Debashish Saha Rubayat Yasir Mustafa 12- 004 12- 024 12- 048 12- 055 12- 066 12- 071 12- 076

Contents
Background Objective Methodology Findings Analysis Recommendation

Background

Objectives

The main objective of this report is A Comprehensive Review on investment management of Al-Arafah Islami Bank Limited & Dutch-Bangla Bank Limited. To find out the sectors in which AIBL & DBBL provides Investment. To identify the main differences between AIBL & DBBL. To identify the risk management technique of AIBL & DBBL. To evaluate financial affairs of those Banks.

Methodology
Research Types It is based on quantitative, qualitative, subjective research by nature.

Sources of data
Secondary Sources: Annual report of the Al-Arafah Islami Bank Ltd and Dutch-Bangla Bank Limited Balance sheet and various documents. Bangladesh Bank Reports. Various websites related with investment management Methods of Data Analysis To reach our final securitization on investment management, we have arranged following techniques for the analysis: Individual Bank analysis Graphical analysis

Findings

The functions and operating modes of DBBL is based on fully manmade principles. The functions and operating modes of AIBL is based on the principles of Islamic Shariah. DBBL gives importance to its creditworthiness customers but AIBL works to its clients as a partners, investors and traders. IBBL enjoy less SLR rate than DBBL. In our Country SLR rate for Islamic bank is 10.50% in the other hand SLR rate for commercial bank like DBBL is 18.5%. So AIBL enjoy more fund to invest in the market than DBBL.

Findings (Continue)

In the modern Islamic banking system, it has become one of the service-oriented functions of the Islamic banks to be a Zakat Collection Centre and they also pay out their Zakat. AIBL does not different from this feature it also deal with Zakat. DBBL does not deal with Zakat. EPS, P/E Ratio, ROE, net profit margin, market price per share of the DBBL is much higher than AIBL in the last five years. That show the management efficiency of the DBBL is better than AIBL. Loan to deposit ratio of DBBL is much higher than AIBL. It can be said in this way that the AIBL maintain adequate loan to deposit ratio than DBBL. For DBBL it is very much risky for them to invest more than 85% to its total deposit.

Findings (Continue)

Credit risk, market risk, exchange risk, liquidity risk, operational risk etc are mainly related with the DBBL banking practice on the other hand exchange risk, default risk, religious risk, concentration risk etc are related with the AIBL investment. Number of investment products and services of DBBL are much wider than AIBL. Though DBBL is practicing traditional banking and AIBL is Islamic banking DBBL investment area is much better than AIBL.

Qualitative Analysis

Regulatory Differences between the Islamic Banking and Conventional Banking

AIBL Banking is based on Shariah and DBBL is based on man made principle AIBL SLR 10.5%, DBBL 18.5%

Mode of Investment Differences between AIBL and DBBL

AIBL invest on buy or profit sharing; DBBL lend on interest Safety on loan Financial strength Observation on Shariah

Qualitative Analysis (Continue)

Risk of Investment of DBBL and AIBL

DBBL

Credit Risk Market Risk Interest Rate Risk Foreign Exchange Risk

AIBL

Exchange Risk Price Risk Concentration Risk Default Risk Religious Risk

Quantitative Analysis

EPS
DBBl 237.37 181.97 AIBL

P/E Ratio
DBBL 12.885 2009 25.81 9.53 78.7 14.62 28.5 4.89 2006 2005 10.27 7.91 12.02 AIBL

179.18

2008
75.85 41.45

2007

38.78

55.02 25.1 2006 2007

54.78 48.29

2005

2008

2009

Quantitative Analysis
ROE
AIBL DBBL 22.45 2009 2008 17.05 2007 2006 2005 24.02 27.81 24.07 21.55 31.01 24.7

30.28 29.89

Cost of Fund
DBBL AIBL 11.255 10.99 9.4 7.48 8.8 9.11 8.44

10.46 7.66

6.53

2005

2006

2007

2008

2009

Quantitative Analysis
Net Profit Margin
DBBL AIBL 12.76 10.7 6.99 6.81 7.53 4.87 3.69 3.735 11.29

5.96

2005

2006

2007

2008

2009

Market Price Per Share

DBBL AIBL

6765 4311 2187.5 306 2005 1840 242 2006 440 2007 444 2008 1957 511 2009

Quantitative Analysis
Classified Loan to Total Investment
DBBL 5.85 AIBL

3.68 2.68 1.58

3.26

3.72

3.27 2.75

2.46 1.685

2005

2006

2007

2008

2009

ROA
DBBL AIBL

1.74 5 1.29 0.93 2006

2.19 1.15

1.71 1.415

0 2005

1.01 2007

1.49 2008

1.6 2009

Quantitative Analysis
Agriculture, Fishing and Forestry -DBBL
900 800 700 600

Agriculture, Fishing and Forestry- AIBL

865.2
663.43 618.72

500 568.4

600
500 400 300 200 100 0 2005 157.29 235.05

400
300 200 17.12 100 0 2005 22.36 0

356.02

2006

2007

2006

2008

2007

2009

2008

2009

Quantitative Analysis
Standard - AIBL
40000 35000 30000 25000 20000 15000 10000 10000 5000 0 2005 2006 2007 2008 2009 5000 0 2005 2006 2007 2008 2009 10802 16781 22760 28493 37652 50000 45000 40000 35000 30000 25000 19988.06 27355.1 28299.33 39592.98

Standard - DBBL
46793.15

20000
15000

Recommendation

AIBL should focused more on the investment of the fund to diversified sectors. They should find some new sector to invest their fund. For DBBL they should keep it up their investment as well as looking for some new sectors to invest their fund. AIBL profitability ratio is very lower than DBBL. Top management of the bank should looking forward it to increase it. DBBL management should keep their increasing trend of their profitability ratio. AIBL SLR rate is higher than the SLR rate of DBBL. So AIBL should take the opportunity to invest their fund and make more profit for the bank and it shareholders.

Recommendation (Continue)

DBBL provides loan to the creditworthiness customers rather than customers emergency. They should change this practices provide fund the fund needed customers. AIBL invested most of its fund in the rural area on the other hand DBBL invested most of its fund in the urban area so they should change their focus point. AIBL should look forward to invest in the urban area and DBBL should invest in rural area.