Term paper on Financial Institution Analysis of IDLC Finance

South East University

Term paper on Financial Institution Analysis of IDLC Finance

Southeast University Term paper on Financial Institution Analysis

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Course Code: FIN-2122 Course Title: Financial Management

Submitted by : Rajj i b Al am Ra 2011010000195






























Southeast University

Abstract

This paper examines the issues or topics which are presently subject to Financial Institution analysis of IDLC financial institutions. The paper demonstrates that there has been diversity in the Topics or issues which non finance believes to be important. A financial institution of the most critical issues or topics t opics is provided which should be helpful to those engaged in doing analysis for financial institutions. IDLC Finance Limited one of renowned non banking financial institution in Bangladesh. It started its operation at 1985 and it is the pioneer financial institution in Bangladesh. IDLC Finance Limited has different kinds of products and services. IDLC is financing in different sectors through their products and services. IDLC Finance Limited is a mother company. I have done my term paper in IDLC finance. And my topic was the

“Financial Institution analysis of IDLC Finance”. In Banglad esh investment bank mainly

perform four kinds of activities. acti vities. They are issue management, underwriting, un derwriting, portfolio management and corporate advising. IDLC Finance Limited is performing all of these four activities. IDLC Finance Limited is providing different capital market related services to the corporation and institution seeking for the funds and individuals seeking opportunities to invest their fund in different securities. The companies wide array products and services range from retail products ,such as home loans, car loans, corporate and SME products including lease and term loans, structured finance services are ranging from syndication to capital restructuring and a complete suite of merchant banking and capital market service. IDLC Finance Limited is Financial institution its activities in such a way, that why number of client of it increasing day by day. It is a very good sign for a capital market. IDLC Finance Limited is a providing good return to its parent company as well as the country economy through its activities. The current term paper aimed at critically examining the Analyzed of a private financial institution. The main objective of this term paper was to analyze the financial institution analysis of IDLC finance ltd. along with how efficiently are providing services to its customer. From Financial Analysis it has been seen that t hat the performance of IDLC finance ltd is really satisfy.
















Acknowledgement

It’s a matter of great contentment to be able to complete this term paper in due time. My

endeavor will be considered successful if the term paper is of any help to t o you. At the very outset I would like to express my heartiest gratitude to Almighty Allah for giving me the capacity to complete this task. Then I would like to place my humble gratitude to my respected faculty Lecturer: S. M. Mujahidul Islam Islam SEU Business School, Southeast University for his valuable time commitment, guidance, patience and stimulation made along with the course of action. I have put my best effort to make this report to serve its purpose; that is, to come across the Financial Institution analysis of IDLC Finance Limited. I would like to avail the opportunity of expressing my deep gratitude and regards to my parents for their continuous support. I am indebted to all of my classmates to support and .providing me with his experience and practical knowledge in this regard. Along with this I want to thank one other people who is Md. Harun ur Rashid. He is my wouldn’t be completed brother. Without the help of these people this term paper proba proba bly wouldn’t

in due time.
















1.1Analysis of Financial Institutions: Analyzing a financial institution is very different from analyzing a corporate entity. When a financial institution has liquidity problems, the end can be fast and furious. This two day class will cover the qualitative and quantitative analysis of financial institutions. Exercises and case studies are included.

1.2 Introduction: One of the renowned names in Bangladesh financial market is financial institution Some financial institutions serve as pass through or agency institutions, where the risks and returns to clients depend primarily on the investment results of the institutions. Such institutions include mutual funds, hedge funds, REITs and defined contribution plans such as 401k plans. Other financial institutions serve as guarantors, or principal institutions, where the institutions offer a fixed return to clients and the institutions retain the actual risks and returns of their investments. This group includes commercial banks, Non- financial institution, insurance companies, sovereign funds and defined benefit pension plans. Leasing Company (IDLC) Limited. It started operation in the year 1985 as the pioneer leasing company as to facilitate lease- financing and capital investment in industrial sector, with the view of “Become the best performing and most innovative solutions provider in the country”. For introducing new

multitude of diverse financial products and services in 2007 the company changed its name to IDLC Finance Ltd. Over the last two decades IDLC has contributed relentlessly in the country’s transition into a developing country and has emerged as Bangladesh’s leading multi

product financial institution. in stitution. The company now offers off ers financial and technological techno logical solutions solution s to both institutional institutiona l and individual clients client s to cater for their unique requirement. requ irement.

1.3 Origin of the report: This term paper is a course requirement r equirement of “FIN-2122: Financial Management”. Our

honorable course instructor assigned us the topic and the report was conducted on Financial Institution and IDLC finance Ltd. I am very glad to have his suggestion and guidelines in this regard. The report mainly focused on the Financial Institution and leas ing company’s

functions, source of fund, investment and rules and regulation regarding leasing company. But as Financial Institution analysis analysis is one of the highest highest concerns of today’s today’s financial

















Southeast University This study arises from the need to know the financial institution analysis in the firm more effectively. The rapid growth of securities, financing company and Investments Company are really thinks about the financial institution. Now a days it is known that the financial institution analysis the organizational performance very well. In financial institution analysis there is lots of important thing. We can also be able to know that how these things are helping or be the independent variable of the knowledge sharing. Accordingly, organization from different sectors, across industries and through different time periods should use these th ese financial institution institu tion analysis tools. tool s. Nevertheless researcher has yet to examine in depth the probable influence of financial institution analysis of a firm in different conditions. However, the reason why individual employees decide whether to actively participate in financial financi al institution analysis anal ysis activities are currently currentl y not well understood. Therefore, this research aims to contribute to the general understanding of the barriers determining the success of financial institution analysis in organizations in general and to the organization under study in particular. “Knowledge is one of the few assets that grows also

usually exponentially when shared financial institution analysis is believed to be one of the most important processes for financial analysis . Davenport and Prusak (2000) and Chua (2003), however, indicate that financial institution is analysis in organizations whether the process is deliberatel y managed or not. Junnarkar (1997) (1 997) also supports this. thi s. View of readily established analysis communities within the organizational framework, even before management makes any kind of effort towards establishing them. Companies are seeking to implement special KM projects, which aim to establish an environment within organizations that will support the effective analysis creation, transfer and use (Davenport et al., 1998). All analysis management initiatives try to foster the sharing of knowledge, ideas, and experiences, in whatever form, among individuals or groups”, as Cabrera and Cabrera (2002)
















1.5.2 Specific Objective:















Southeast University acting as financial intermediaries. Most financial institutions are regulated by the government. Broadly speaking, there are three major types of financial institutions: 1 Depositary Institutions : Deposit-taking institutions that accept and manage deposits and

make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies 2 Contractual Institutions : Insurance companies and pension funds; and 3 Investment Institutes: Investment Banks, underwriters, brokerage firms

Function: Financial institutions provide service as intermediaries of financial markets. They are responsible for transferring funds from investors to companies in need of those funds. Financial institutions facilitate the flow of money through the economy. Standing settlement instructions: Standing Settlement Instructions (SSIs) are the agreements between two financial institutions institution s which fix the receiving agents of each counterparty in ordinary trades of some type. These agreements allow traders to make faster trades since time used to settle the receiving agents are conserved. Limiting the trader to an SSI also lowers the likelihood of a fraud. Regulation See also: Financial institutions in most countries operate in a heavily regulated

environment as they are critical parts of countries' economies. Regulation structures differ in each country, but typically involve prudential regulation as well as consumer protection and market stability. Some countries have one consolidated agency that regulates all financial institutions while others have separate agencies for different types of institutions such as banks, insurance companies compan ies and brokers. See also:















Southeast University investment banks and providers of private equity and venture capital. Thus our research program focuses not only on ‘traditional’ banking questions, such as the regulation of

commercial banks and the monetary transmission channels between the banking sector and the real economy, but also on the role and efficiency of investment banks and private equity funds in helping companies raise capital.

2.2.2 Expert Insight into Bank and Insurance Financial Strength: As the scrutiny of banks has increased in the aftermath of the credit crisis, the ability to accurately assess the strength of banks and their security has become more important than ever. Moody's Investors Service Bank Research is designed to provide financial market participants with fundamental fundam ental analysis and expert exp ert insight into bank credit cr edit risk.

2.2.3 Bryce W. Rowe, CFA ,Senior Research Analyst, Community Banks: Bryce Rowe is Baird’s senior analyst covering Community Banks / Business Development

Companies. Prior to joining Baird in 2006, Bryce held equity analyst positions at several regional brokerage firms with the most recent being Legg Mason. In 2011, Bryce was selected for The Wall Street Journal’s Best on the Street Analyst Survey for Commercial

Banks and Savings & Loans, ranking No. 4, and his second recognition by The Wall Street Journal. He received a BA in Economics from the University of Virginia. Bryce Rowe is Baird’s senior analyst covering Community Banks / Business Development Companies. Prior

to joining Baird in 2006, Bryce held equity analyst positions at several regional brokerage firms with the most recent being Legg Mason. In 2003, Bryce was selected for The Wall Street Journal’s Best on the Street Analyst Survey for Commercial Banks and Savings &

Loans. He received a BA in Economics from the University of Virginia.















Southeast University also has seven years of experience in the banking industry, as he held senior commercial lending positions with both Fifth Third Bancorp and Huntington Bancshares. David received a BA in Sociology from the College of Wooster (Ohio).

Factors Location Convenience Other Convenience Facto (such as parking, hours and the like)

Rank 1 2

Advertising

3

Bank Atmosphere

4


















3.1.1 Data can be qualitative or quantitative: A) Qualitative data is descriptive information (it describes something) B) Quantitative (numbers).

data

is

numerical

information

Quantitative data can also be Discrete or Continuous: Discrete data can only take certain values (like whole numbers) Continuous data can take any value (within a range) Put simply: simply: Discrete data is counted, Continuous data is measured Example: What do we know about Arrow the Dog?

Collecting: Data can be collected in many ways. The simplest way is direct observation. Collecting: Example: you want to find how many cars pass by a certain point on a road in a 10-minute















Southeast University or information – to to What does each and every research project need to get results? Data – or help answer questions understand a specific issue or support a hypothesis.

At the Institute for Work & Health, researchers conduct many projects each year. Some projects involve going goi ng into workplaces and asking ask ing workers questions. questi ons. Researchers who do this have specific work-health questions in mind that they’d like answered.

The answers – or or data – used used from the responses are called primary data.

Other Institute projects involve using data that has already been gathered by someone else, such as survey information from the Canadian Census. Researchers then examine this information in a different way to find a response to their question. This data are called secondary data.

3.3 I collected the secondary data:















Southeast University German Investment and Development company (DEG) one of largest European development finance institutions and a member of KfW Bankengruppe Kookmin bank, one of the largest banks in South Korea Korea Development Develop ment financing Corporation, Corpor ation, one of the largest leasing le asing companies in South Korea of the 1980s The Aga Khan fund for Economic Development, a leading international development agency The City Bank Limited, one of the oldest private Commercial Bank in Bangladesh IPDC of Bangladesh Limited, the first private sector financial institution in Bangladesh and Sadharan Bima corporation, the only state ownerd general insurance corporation in Bangladesh Today IDLC finance is the leading multi product Non Banking Finacial Institution in Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans .deposit and capital market products and service to the Corparate, Consumer and SME client segments. IDLC operates in the Capital market through its wholly owned subsidiaries IDLC investment Limited and IDLC securities Limited The IDLC group has always been a standard bearer for the financial sector in terms of corporate governance and statutory compliance. The group is also highly regarded for its professional pool of resource r esource and progressive progressi ve work environment. In 2010, the IDLC group committed to sustainable business by becoming a member of the Bangladesh CSR Centre, the United Nations Global Compact (UNGC), and finally, the United Nation Environment Programmed Finance Initiative (UNEP FI) IDLC received a long term rating of AA1 and short term rating of ST-1, as of June 30,2011
















4.1.3 Our Corporate Philosophy: Discharge our functions with proper accountability for actions and results and bind ourselves to the highest ethical standards 4.1.4 Goal:
















4.1.7 Sector wise exposure – exposure – December December 31, 2012:

















Southeast University IDLC offers products under four major business segments Consumer, Corporate, Small and Medium Enterprise and Capital Markets. Consumer Finance Deposit

Schemes  Cumulative term Deposit  Monthly/ Quarterly/Annual Earner Deposit  Double/ Triple Money Deposit  Short-term Deposit Home Loan Car Loan Personal Loan Corporate: Corporate Finance 

Term Loan

Structured Finance Solutions: Fund-raising :\Loan\Leas\private placement of Equity
















4.1.9 KEY FINANCIAL OF IDLC GROUP:















Southeast University A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. compan y. Ratio analysis is predominately predominate ly used by proponents propo nents of fundamental analysis.

4.2.1Types of Ratio and Categories of Financial Ratios Rati os : Liquidity Measurement Ratios

4) Operating Performance Ratios

a)Current Ratio

) Fixed Asset Turnover

b) Quick Ratio

b) Sales/Revenue Per Employee

c) Cash Ratio

c) Operating Cycle

d) Cash Conversion Cycle

5) Cash Flow Indicator Ratios a) Operating Cash Flow/Sales Ratio

2) Profitability Indicator Ratios

b) Free Cash Flow/Operating Cash Ratio
















Financial Performance

2007

2008

2009

2010

2011

Growth %















Southeast University Lease and Term loans disbursed

2,977

3,412

3,750

4,345

8,517

96.03%

Housing finance disbursement

1,255

1,612

1,839

2,121

2,586

21.90%

Short term finance portfolio

213

336

317

468

821

75.61%

Lease Finance

4,571

4,734

4,383

4,107

4,547

10.72%

Real estate finance assets

3,065

3,915

4,789

5,605

6,979

24.52%

Total assets

15,056

17,342

22,681

26,930

31,165

15.72%

Long term liabilities

11,103

12,115

18,792

21,745

25,299

16.34%

Term deposit balance

8,257

8,249

9,780

12,373

16,828

36.01%

Net current assets

1,401

1,559

3,645

4,172

3,676

-11.88%

883

1,179

1,913

3,047

2,160

-29.11%

Operational Performance

Operational income
































Southeast University Fi nance (2011) = 2.32% Non performing lone Ratio of IDLC Finance






























































Southeast University Price Earnings ratio of IDLC Finance (2011) = 27.41 Times




























































Southeast University The company believes that superior service, diversification of client segment and business strong risk































































Term paper on Financial Institution Analysis of IDLC Finance

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