1
Group Assignment
On
Overview of the Financial Market and operations of
Commercial Banks in Bangladesh
Course Name- Financial Environment & Banking
Course Code- FIN201
Section- 4
Submitted toAbu Saad Md. Al Masnun Al Mahi
Lecturer,
Brac Business School
Brac University
2
Name
Raisa Ahmed
Humaira Alam
Md. Al Mahdi Borhan
Shafin S. Khan
Sumiya Khan Neha
Student ID
21204164
21204175
21204235
21204098
21304007
Current
Semester
6th
6th
6th
6th
7th
Contribution
Sec A (a)
Factors that contributed
to the interest rate
movement in the
Bangladesh market in the
last 5 years
Sec A (b)
policies that Bangladesh
Bank has taken to control
the interest rate in the last
5 years
Part B
Operations of
Commercial Banks in
Bangladesh (Bank Asia)
Part B
Operations of
Commercial Banks in
Bangladesh (Southeast
Bank)
Part B
Analysis &
Discussion,Introduction,
Conclusion.
Signature
3
Table of Contents
* Introduction
4
* Factors contributing to interest rate movement
4
* Policies that Bangladesh Bank has taken to control the interest rate
8
* Operations of Commercial Banks
10
* Banking Operations of SouthEast Bank
11
* Banking Operations of Bank Asia
15
* Analysis & Discussion
18
* Appendix
23
4
Introduction
Within the dynamic and fluid realm of finance, financial institutions such as banks play a pivotal
role in fostering economic expansion and ensuring its sustained equilibrium. During the period
spanning from 2018 to 2020, global financial institutions experienced a significant period of
transformation and adjustment. Bank Asia and Southeast Bank, prominent players in the banking
sector, successfully navigated a diverse range of challenges and opportunities, resulting in
significant financial transformations. This comprehensive term paper provides an in-depth
analysis of the financial transformations that transpired within these banking institutions during
this pivotal period.
This paper provides an analysis of the strategic decisions, technical investments, and operational
adjustments that shaped the financial performance of Bank Asia and Southeast Bank. The
examination is based on an evaluation of annual reports, financial statements, and expert
analyses. Upon closer examination of the subtleties behind their financial adjustments, it
becomes evident how these banks meticulously reoriented their objectives to correspond with the
evolving expectations of their stakeholders and the dynamic landscape of the financial industry.
The primary objective of this study is to provide valuable insights into the financial strategies of
South East Bank and Bank Asia, as well as their capacity for adaptability. Through an analysis of
the alterations observed in their financial reports, our objective is to identify the strategies that
have contributed to their success or highlight areas that require more attention. This analysis
aims to provide readers with a deeper understanding of the evolutionary trajectory of banking
companies.
Objectives of the study
The main motto of the study1. To determine what factors altered the interest rate in the Bangladesh financial market
from 2018 to 2022.
2. To Examine the implementation and results of the policies enacted by Bangladesh Bank
in an effort to maintain interest rate stability over a specific time period.
3. To discover the sources of funding and expenditure patterns of Southeast Bank and Bank
Asia.
4. To conduct an analysis of the prevailing trends and performance of banks.
5
Section A
(a) Factors that contributed to the interest rate movement in the Bangladesh market in the
last five years (i.e., 2018 – 2022).
Several factors influence the movement of interest rates on the Bangladeshi market. The factors
may or may not change over time; this is not immutable. The factors may include inflation, the
state of the economy, political stability, and the monetary decisions made by the Bangladesh
Bank, among others. It is essential to recognize that these occurrences can be complex and that
multiple factors may interact in the fluctuation of the inflation rate. Now, let's analyze the
movement and factors that contributed to the recent (2018-2022) change in interest rates.
2018- The deposit interest rate had a rise from 5.01% at the beginning of January 2018 to 5.26%
at the end of December 2019. With respect to the advance rate, it started at 9.42% in January
2018 and then had a slight increase to 9.46% by December 2018. Upon conducting a thorough
review of the data, it becomes clear that there was an observed rise in both the deposit rate and
advance rate for the year 2019. It is important to highlight that a significant factor has
contributed to the observed pattern.
FactorDecline of stock market- The year 2018 was a difficult one for capital markets. In 2018, the
broad index DSEX declined by 13.8%, wiping out $4.3 billion in market capitalization, after the
market posted an impressive 24% return in 2017. In 2018, the average daily turnover decreased
by 37% compared to 2017, totaling approximately $65.6 million. This resulted in a large trade
deficit, a decline in the money market and stock market, and a decline in the value of the
Bangladeshi currency, which explains the increase in lending and advance rates in 2018.
2019- The deposit interest rate at the start of January 2019 was at 5.30%, observing an increase
to 5.70% by the end of December 2020. In terms of the advance rate, it began at 9.49% in
January 2019 and then rose to 9.68% by December 2019. Through a thorough analysis of the
6
data, it becomes evident that the deposit rate and advance rate had an increase in the year 2019. It
is noteworthy that a key element contributed to this observed trend.
FactorPolitical unrest- The 11th General Election of Bangladesh took place on December 30, 2018,
and we are all familiar with the complications that accompany an election. This form of political
disturbance introduces instability into the market, resulting in an increase in the interest rate.
During this period of political unrest, the Bangladeshi market experienced a decline in foreign
investor interest, resulting in a downward path of the economic conditions. Consequently, the
election held towards the end of 2018 led to an increase in deposit and advance rates in 2019.
2020- The deposit interest rate at the beginning of January 2020 stood at 5.69%, but experienced
a decrease to 4.54% by the end of December 2020. Similarly, the lending rate, also known as the
advance rate, started at 9.66% in January 2020 and subsequently declined to 7.61% by December
2020. By doing an analysis of the data, it becomes evident that the deposit rate and advance rate
had a decline in the year 2020. It is apparent that a notable factor contributed to this occurrence.
Factor
Covid-We all know that Covid 19 was a big hit all over the world. Many people lost their jobs,
and many families lost their main source of income. Also, healthcare expenses increased, and so
on. This factor played a crucial influence in the 2020 interest rate movement. As mentioned
previously, there was a significant decline in the deposit and advance rate because people needed
loanable funds the most at that time. As a result, Bangladesh Bank took steps to ensure that
household and business operations continued uninterrupted by providing liquidity and loanable
funds to the market. As a result of this measure, the advance rate decreased, which was
advantageous for surplus units seeking loans at a lower rate, but a negative trend for depositors.
2021- From 2018 onwards, there was an ongoing rise observed in both the deposit rate and
advance rate until the beginning of 2020. Subsequently, there was a continuous decline in both
rates until the beginning of 2022. Based on the data collected from the official website of the
Bangladesh Bank, it is visible that the deposit rate saw a decline from 4.54% in December 2020
7
to 4.51% in January 2021, showing a decrease within a one-month period. In December 2021,
the deposit rate experienced a significant decline, reaching 3.99%. About the advanced rate, it
began at 7.56% in January 2021 and subsequently decreased to 7.18% by the conclusion of the
year.
FactorCovid (second wave)- .The interest rate fluctuation remains consistent between the years 2020
and 2021. The beginning of the second wave of the COVID-19 pandemic in Bangladesh hit in
March 2021, hence continuing the presence of the virus and limiting the country's economic
recovery from the previous year's crisis. In order to maintain uninterrupted home and business
operations, it was necessary for the government and the Bangladesh Bank to address the ongoing
need for funds. Consequently, liquidity and loanable funds were provided to the market, resulting
in a fall in both deposit and advance rates for the year 2021.
2022-In the year 2022, the deposit interest rates indicated a rise, starting at 4.01% at the
beginning of the year and ending at 4.23% at the end of 2020. The Advance rate started at
7.13% in January 2022 and peaked at 7.22% in December of that year. After looking at the
numbers, it's clear that both the deposit rate and the advance rate went up in 2022. It's worth
noting that a significant factor helped to produce this observable pattern.
FactorRussia-Ukraine war- Beginning in February 2022, the war between Russia and Ukraine had a
significant impact on many developing nations, including Bangladesh. As Bangladesh relies
significantly on energy and food imports, the price spike during this period had a significant
negative impact. This war precipitated a cost of living crisis in Bangladesh and depleted the
reserve ratio of the central bank. Low tax revenue, excessive reliance on imports, a limited
export base, and interest rate limits increased the deposit and advance rates.
8
(b) policies that Bangladesh Bank has taken to control the interest rate during
the same period
The policy changes made by Bangladesh Bank in Fiscal Year 2018—a one percentage point cut
in the CRR, a 75 basis point reduction in the repo rate, and funding was restricted as a result of
the unfavorable NFA growth brought on by the steeply expanding shortfalls in current accounts,
which led to the introduction of repo lengths that exceeded 28 days. These actions assisted in
preventing interest rate increases. Inflationary forces are still present, nevertheless, as evidenced
by the upward trajectory in core CPI, economic development and the results of Bangladesh
Bank's inflation anticipation poll. The repurchase agreement and reverse repurchase rates will be
maintained at current levels of 6.0 and 4.75 percent, respectively, for H2FY19 due to the
immediate international and national inflation and economic forecasts and the associated
dangers. This is done in an effort to balance inflation and output risks. The H2FY19 monetary
initiatives set the supply of cash and credit within the country , and limitations on expansion of
credit for the business community are set at 12, 15, and 16.5 percent, accordingly. These targets
are high enough to allow for the achievement of the national budget's 7.8 percent nominal
growth in gross domestic product and 5.6% inflation in the consumer price index are forecast,
proportionately. In H2F19, Bangladesh Bank will continue to favour and promote sufficient
finance for essential manufacturing industries that create jobs. Preserving the economic
flexibility of interest and rates of exchange in the Taka is necessary to facilitate the massive
9
investment activation required to obtain Bangladesh's objectives for quick economic growth. In
H2FY19, it will grow more apparent whether the current firmness in donating and deposit
interest rates also played a role (with a large amount of NSCs diverting off a sizable portion of
individual investments, resulting in development to decline in savings in banks carrying a much
decreased interest rate). The substantial reduction in lending from the private sector rise in
H1FY19 might be considered primarily driven by challenges associated with the forthcoming
national election.
Bangladesh Bank conducted a variety of currency and cash reinforcement actions to ensure
ongoing commercial activities by providing sufficient financing and loanable currencies to the
financial sector. These include, but are not limited to, the implementation of term repurchase
agreement, the expansion of the Advance to Deposit Ratio (ADR), and the Investment to Deposit
Ratio (IDR).
CRR: The Cash Reserve Ratio (CRR) was reduced by 50 base factors to five percent on a
fortnightly aggregate system and around 4.5 percent on a regular schedule as of the beginning of
April 2020. The Cash Reserve Ratio was lowered by 100 base factors to four percent on a
fortnightly mean and 3.5 percent on per day as of the fifteenth of April, 2020.
With effect from 1 July 2020, the CRR for the offshore banking operations was decreased by 200
basis points to 2.0 percent on a biweekly average and 1.5 percent on a daily basis.
• The CRR for Non-Bank Financial Institutions (NBFIs) has been reduced as well with response
from the first of June 2020 by 100 base points, corresponding to a growth rate of 1.5 percent on a
median fortnightly system and 1% on a regular schedule.
A repurchase agreement Rate: The repo rate decreased by 25 base factors to 5.75% as of 24
March 2020.
• As of 12 April 2020, it was decreased by 50 basis points to 5.25 %.
• The rate of interest was once again reduced by 50 base points to 4.75 percent with impact from
July 30, 2020.
* Term Repo Facility:- With effect from May 13, 2020, a 360-day repo facility was implemented
to fulfil the banks' and Non-Bank Financial Institutions’ long term borrowing requirements.
On July 30, 2020, the reverse repurchase agreement rate decreased by 75 basis points to 4 %.
Bank Rate: The bank rate was reduced by 100 basic factors to 4% upon the 29th of July in 2020.
10
Advance to Deposit Ratio (ADR) and Investment to Deposit Ratio (IDR) : As of the fifteenth of
April 2020, the ADR for conventional financial institutions raised by 2 percent to a value of
eighty-seven percentage
• The IDR for sharia-compliant Islamic banks was raised by 2% resulting in 92% from the
fifteenth of April in 2020.
In general, Bangladesh Bank's monetary policy has been effective in reducing inflationary
pressure in Fiscal Year 2021. Despite the unprecedented monetary and fiscal expansion and
accommodation, supply chain disruptions caused by COVID-19-related containment measures,
and an increase in global prices, the CPI-based average inflation rate decreased to 5.56 percent
from 5.65 percent in Fiscal Year 2020. This is below the target of 5.40 percent for Fiscal Year 21.
The monetary policy position and monetary programme outlined for Fiscal Year 2021 were
largely successful in terms of providing the economy with enough liquidity accompanied by a
reduced market interest rate regime, limiting inflation while ensuring stability in both the local
and foreign exchange markets.
Section B
Operations of Commercial Banks
Recent years have seen commercial banks become crucial to the economy. The operational
structure prioritizes customer happiness and economic growth, supporting financial transaction
evolution. Our term paper analyses the operations of two Bangladeshi commercial banks from
2018 to 2022. Southeast Bank Ltd. and Bank Asia Limited.
Banking Operations of Southeast Bank Ltd
The holding company Southeast Bank Ltd. provides corporate banking services. Financial
services include deposit banking, loans and advances, export and import funding, and domestic
and international money transfers.The company is known for its commitment to quality and
service.
11
Major sources of Fund
The functioning of a commercial bank is primarily contingent upon the acquisition and allocation
of capital. To gain insight into the execution of their activities, one may examine the balance
sheet. An entity's stated liabilities and equity provide insight into its financial resources' origins.
The primary sources of funds for Southeast Bank can be summarized as follows:
1. Borrowed Funds
Southeast Bank has continuously borrowed funds from commercial banks and other financial
institutions by issuing subordinate bonds and other borrowings. Between FY “2018-2022,” its
total amount of borrowing is “150,326,750,215” BDT.
2018
2019
2020
2021
2022
22,957,491,516
23,901,399,879
32,497,676,319
37,576,484,757
33,393,697,744
BDT
BDT
BDT
BDT
BDT
The money was taken through junior bonds and other forms of debt. All loans are not insured,
which shows that there is no protection and makes it necessary to pay back the loan when the
lender asks for it.
2. Deposits
Like many other financial institutions, Southeast Bank has accumulated a significant portion of
its funds through deposit acquisition. In addition to amassing cash from current, savings, and
fixed accounts, the institution also acquires funds by issuing short-term bills payable. The total
amount of funds collected from FY “2018-22” through deposit is “1,752,775,204,461” BDT.
2018
2019
2020
2021
2022
298,320,586,377 329,797,460,573
359,899,884,814 376,678,226,090
371,300,705,331
BDT
BDT
BDT
BDT
BDT
12
3. Capital/Shareholder’s Equity
Most of the time, "bank capital" refers to the money a bank gets from selling shares of stock or
keeping earnings. The capital structure of Southeast Bank comprises its paid-up capital, statutory
reserve, revaluation reserve, other reserve, and retained earnings. The total capital funds
collected from "the 2018-2022" fiscal year is "148,538,573,116" BDT.
2018
2019
2020
2021
2022
28,051,339,079
30,418,837,815
29,580,060,277
29,796,281,107
30,692,054,838
BDT
BDT
BDT
BDT
BDT
4. Other Liabilities
Southeast Bank acquires financial resources beyond utility payments through the accrual of
interest on borrowed loans and the collection of other outstanding obligations. The aggregate
sum of funds obtained through alternative liabilities during the preceding five-year period
amounts to “220,237,569,644” BDT.
The provided Graph represents the mean value of the sources of funding for Southeast Bank over
a period of five years.
13
Distribution of Funds
Southeast Bank uses their funds in terms of Cash, Loans , Investment and Other asset. Loans
consist of four categories such as commercial loans, short-term loans, consumer loans and real
estate loans. They don’t have any non-banking assets.
1. Cash
Financial institutions must maintain a certain amount of cash reserves to comply with the reserve
requirements mandated by the Bangladesh Bank. Southeast Bank maintains a cash reserve to
ensure sufficient liquidity and address prospective withdrawal requests from depositors. The total
amount of cash used by them for the last 5 year is “102,263,909,735” BDT.
2018
2019
2020
2021
2022
21,515,366,229
22,619,551,683
21,431,263,489
16,418,434,881
20,279,293,453
BDT
BDT
BDT
BDT
BDT
The cash balance includes both foreign currency and funds held by Bangladesh Bank and its
correspondent banks.
2. Bank Loans
Southeast Bank provides loans and advances specifically to individuals engaged in business
activities and entrepreneurial ventures, consequently generating interest income. Indeed, this
constitutes the primary revenue stream for the financial institution. The total amount of loans
given over the last five years is “1,657,590,545,152” BDT.
Types
of 2018
2019
2020
2021
2022
Bank loans
Commercial
6,257,702,009
7,331,583,975
4,535,731,849
4,272,089,729 5,853,153,575
loans
BDT
BDT
BDT
BDT
Short-term
6,897,100,000
4,739,531,100
2,208,907,300
8,530,100,000 781,300,000
loans
BDT
BDT
BDT
BDT
BDT
BDT
14
Consumer
265,204,210,5
295,015,113,3
320,368,158,8
333,504,732,3 344,932,266,00
loans
59 BDT
20 BDT
70 BDT
41 BDT
8,754,955,398
9,182,672,927
9,631,935,472 10,806,936,979
BDT
BDT
BDT
Real
estate 8,782,363,746
loans
BDT
3 BDT
BDT
Commercial loans consist of both inside and outside Bangladesh Banks. Cash credit, overdrafts,
bills purchased are included in short-term loans. Fixed assets such as premises,furniture and
fixtures are part of Real estate loans.
3. Investment
A portion of Southeast Bank's capital has been invested in government-issued securities such as
Treasury bills, bonds, etc. The securities are redeemable anytime and serve as protection for their
funds. From 2018 to 2022, "251,940,766,387" BDT has been invested in government and other
securities.
2018
2019
2020
2021
2022
62,883,756,194
74,484,390,091
94,184,252,606
10,194,183,748
10,194,183,748
BDT
BDT
BDT
BDT
BDT
4. Other assets
Other than these major uses of funds Southeast Bank has distributed their funds through a
number of secondary assets, such as advance rent and deposit stationery, stamps, printing
materials, and other items. Interest on investments, commissions, brokerage fees on stocks and
bonds, and additional financial inflows. In the past five years, "57,651,292,218" BDT have been
expended.
15
The provided Graph represents the mean value of the uses of funding for Southeast Bank over a
period of five years.
Banking Operations of Bank Asia Ltd
Bank Asia Ltd., the holding entity, provides corporate banking services. There are deposit
banking services, loans and advances, financing for exports and imports, and domestic and
international money transfers.The business is renowned for its dedication to quality and service.
1. Borrowed Funds
Bank Asia has consistently borrowed funds from commercial banks and other financial
institutions through the issuance of subordinated bonds and other forms of borrowing. Between
fiscal years "2018-2022," its total debt is "200,594,132,146" BDT.
2018
2019
2020
2021
2022
31,379,916,599
34,382,128,495
35,971,854,941
47,836,151,368
51,024,080,743
BDT
BDT
BDT
BDT
BDT
16
The money that was borrowed came from junior bonds and other loans. All loans are uninsured,
which means they are not backed by collateral and must be paid back as soon as the lender asks
for it.
2. Deposits
Bank Asia, like many other financial institutions, has amassed a substantial portion of its capital
through deposit acquisition. In addition to accumulating funds through current, savings, and
fixed accounts, the institution also obtains funds through the issuance of short-term bills payable.
The total amount of funds deposited during fiscal years "2018-22" is "1,436,118,579,555" BDT..
2018
2019
2020
2021
2022
222,734,891,777 254,077,526,668
303,028,106,360 318,424,929,865
337,853,124,886
BDT
BDT
BDT
BDT
BDT
17
3. Capital/Shareholder’s Equity
Typically, "bank capital" refers to the money a bank receives from selling stock or retaining
earnings. Capital at Southeast Bank consists of paid-up capital, statutory reserve, revaluation
reserve, other reserve, and retained earnings. The total amount of capital funds collected during
"the 2018-2022 fiscal year" amounts to "1,983,493,717,513 BDT."
2018
2019
2020
2021
2022
309,227,870,658
353,800,373,697
408,717,150,859
441,026,191,438
470,722,130,861
BDT
BDT
BDT
BDT
BDT
18
Distribution of Funds
Bank Asia uses their funds in terms of Cash, Loans , Investment and Other assets. Loans consist
of four categories such as commercial loans, short-term loans, consumer loans and real estate
loans. They don’t have any non-banking assets.
1. Cash
To comply with the Bangladesh Bank's reserve requirements, financial institutions must maintain
a certain quantity of cash reserves.Bank Asia maintains a cash reserve to guarantee sufficient
liquidity and accommodate potential depositor withdrawal requests. During the past five years,
they have used a total of "116,603,513,588" BDT in cash.
2018
2019
2020
2021
2022
15,555,719,854
23,985,692,079
17,899,782,364
33,365,082,062
25,797,237,229
BDT
BDT
BDT
BDT
BDT
19
Cash balance is made up of both foreign cash and the balance with Bangladesh Bank and its
agent banks.
2. Bank Loans
Bank Asia provides loans and advances to individuals engaged in business and entrepreneurial
endeavors, generating interest income as a result. In fact, this is the primary source of income for
the financial institution. The total amount of loans granted over the past five years is
"1,240,570,943,403" BDT.
2018
2019
2021
2022
217,552,931,835 230,095,211,871 247,331,848,282
264,999,483,971
280,591,467,444
BDT
BDT
BDT
BDT
2020
BDT
20
3. Investment
A portion of Bank Asia’s capital has been invested in government-issued securities such as
Treasury bills, bonds, etc. The securities are redeemable anytime and serve as protection for their
funds. From 2018 to 2022, "368,045,116,516" BDT has been invested in government and other
securities.
2018
2019
36,544,202,442
BDT
2020
2021
2022
55,526,971,926 94,184,252,606
77,951,433,954
103,838,255,588
BDT
BDT
BDT
BDT
21
Analysis & Discussion
South East bank
During the period spanning from 2018 to 2022, Southeast Bank Ltd. has experienced a range of
alterations in its operational strategies and funding channels.
The bank consistently engaged in borrowing activities through subordinate bonds and other
forms of borrowings, resulting in a gradual increase in the borrowed amount over the course of
several years.
Deposits: The money acquired through the act of depositing, encompassing various types such
as current, savings, and fixed accounts, exhibited a steady rise, so suggesting a heightened level
of customer confidence and an influx of monetary resources.
The bank's capital, which includes paid-up capital, reserves, and retained earnings, experienced
minor variations but overall remained at a stable level.
22
Other liabilities: The bank bolstered its financial position by accruing interest on borrowed
loans and fulfilling other obligations, so acquiring additional resources.
The cash reserves exhibited annual fluctuations, potentially attributed to modifications made to
fulfil reserve obligations and address liquidity demands.
Bank Loans: The disbursement of loans exhibited variances across multiple categories,
including commercial, short-term, consumer, and real estate loans. These changes may
potentially indicate fluctuations in demand among different sectors.
The bank made investments in government securities, which may have experienced variations
due to market conditions and the bank's risk tolerance.
Additional assets: The bank's overall financial situation was influenced by the allocation of
funds towards secondary assets, as well as the intake of financial resources such as interest and
fees.
The aforementioned modifications demonstrate the bank's proactive strategy in effectively
overseeing its activities and adjusting to the changing economic environment throughout the
span of five years.
Certainly, I can assist you with that request. The following is a comprehensive overview of the
primary sources and applications of funds for Southeast Bank Ltd. throughout the period
spanning from 2018 to 2022.
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The Sources of Financial Capital:
The bank consistently obtained borrowed funds by issuing subordinate bonds and engaging in
other borrowing activities. During this period, the aggregate borrowing reached around 79.36
billion BDT.
Southeast Bank accumulated a significant amount of funds through various types of deposits,
encompassing current, savings, and fixed accounts, with short-term debts that were due. During
this period, the aggregate amount of deposits amounted to approximately 987.9 billion
Bangladeshi Taka (BDT).
The bank's capital consisted of paid-up capital, reserves, and retained earnings, amounting to
approximately 88.05 billion BDT.
Additionally, the bank acquired funds amounting to about 82.35 billion BDT from loan interest
and other outstanding debts, including other liabilities.
Cash reserves were maintained by Southeast Bank in order to ensure sufficient funds were
available to meet withdrawal demands. Approximately 65.5 billion Bangladeshi Taka (BDT) was
expended in the given temporal interval.
Bank Loans: The bank disbursed loans amounting to around 845.4 billion BDT, encompassing
several categories such as business, short-term, consumer, and real estate loans.
24
The capital allocation of Southeast Bank, amounting to approximately 231.55 billion BDT, was
invested in assets issued by the government.
Other assets refer to various expenses incurred by the bank, such as rent and deposit stationery,
which amounted to around 27.18 billion BDT. These expenses can be categorized as secondary
assets.
The allocation and utilization of funds:
The financial institution maintained reserves of funds, encompassing both foreign currency and
balances held with the Bangladesh Bank and affiliated institutions. This measure was
implemented to provide an adequate cash reserve and preparedness for potential withdrawal
demands.
Bank Loans: With the objective of generating revenue through interest, financial institutions
extended loans and advances to individuals as well as enterprises. Various types of loans that
might be obtained included consumer loans, real estate loans, business loans, and short-term
loans.
Investments: As a precautionary step, the bank allocated a portion of their clients' funds towards
government-issued securities such as Treasury bills and bonds. Individuals deposit their funds
into these financial instruments as a means of safeguarding their assets.
Additional Assets: The funds were allocated towards various items, such as deposit stationery,
stamps, printing materials, and pre-paid rent. In addition to generating revenue from interest on
assets, the bank also derived income from commissions and fees associated with brokerage
services.
Various sources of cash were allocated for diverse purposes, such as sustaining corporate
operations, extending loans, engaging in investments, and undertaking other business-related
25
activities. Additionally, these monies were utilized to facilitate the operational activities of the
bank, which were successfully executed with the assistance of these money.
Bank Asia
During the period spanning from 2018 to 2022, Bank Asia Ltd. has exhibited notable fluctuations
in its financial statistics and performance. The following is a concise overview of the main ideas:
The borrowed funds of Bank Asia exhibited a consistent upward trend from 2018 to 2022,
resulting in a cumulative debt escalation from BDT 31.4 billion to BDT 51 billion. The primary
method of borrowing employed was the issue of subordinated bonds and other types of
borrowing. The utilisation of borrowed funds may suggest a requirement for external capital to
sustain the bank's operations and facilitate its growth.
The bank witnessed an expansion in its deposit portfolio, as it amassed funds from various types
of accounts including current, savings, and fixed accounts. The amount of deposits had a
significant increase, rising from BDT 222.7 billion in 2018 to BDT 337.9 billion in 2022. The
26
observed expansion demonstrates the bank's capacity to effectively recruit and maintain
customer deposits, hence enhancing its overall financing stability.
The capital or shareholder's equity of Bank Asia has exhibited a notable improvement over the
course of several years. The accumulation of capital funds has experienced a substantial increase,
ascending from BDT 309.2 billion in 2018 to BDT 470.7 billion in 2022. The observed rise
indicates the bank's endeavours to strengthen its financial robustness and fulfil regulatory
obligations.
The allocation of finances by the bank, namely in terms of cash, loans, and investments, serves
as a reflection of its operational strategies.
Bank Asia effectively managed its cash reserves, which fluctuated between BDT 15.6 billion and
BDT 33.4 billion, in order to maintain sufficient liquidity for accommodating depositor
withdrawal demands and adhering to regulatory requirements.
Loans, which constitute the principal revenue stream for banks, experienced a constant growth
trajectory as they were extended to enterprises and entrepreneurs. The aggregate amount of loans
disbursed experienced an increase from BDT 217.6 billion in 2018 to BDT 280.6 billion in 2022,
thereby highlighting the proactive involvement of the bank in promoting and supporting
economic endeavors.
The investment portfolio of Bank Asia has witnessed a substantial increase in its holdings of
government-issued securities, indicating a strategic emphasis on generating income and
managing risk. The investment value experienced a significant increase, growing from BDT 36.5
billion in 2018 to BDT 103.8 billion in 2022.
Bank Asia has demonstrated favorable progress in critical domains like deposits, loans, and
capital funds, while considering performance evaluation. Nevertheless, the growing dependence
on borrowed funds may give rise to concerns over the bank's capacity to produce internal capital.
The observed trend of continuous expansion in loan disbursements indicates the efficacy of
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lending strategies, whilst the emphasis placed on investments signifies a prudent and
well-rounded approach to risk management.
In general, the performance of Bank Asia appears to be positive. However, a thorough evaluation
necessitates the inclusion of additional elements like profitability, asset quality, and market
rivalry, which are not addressed in the available data.
Appendix
SEBL_BalanceSheet_2018-2022.pdf
Conclusion
In conclusion, the comprehensive investigation into the operations of Southeast Bank and Bank
Asia Ltd., alongside the determinants impacting the volatility of interest rates during the period
spanning from 2018 to 2022, has provided valuable insights into the intricate dynamics of the
banking industry in Bangladesh. The aforementioned findings can be ascribed to the
interdependence between Southeast Bank and Bank Asia Ltd. throughout the specified
timeframe, wherein the financial transactions of these banks were closely intertwined with the
prevailing economic and geopolitical circumstances. The fluctuations in interest rates can be
interpreted as a manifestation of the dynamic economic landscape, influenced by a diverse
range of factors.