Introduction

A commercial bank is a retail financial institution that helps community members open
checking and savings accounts and manages money market accounts. It also provides
customers with deposit, withdrawal and transfer services. This is a financial institution
providing services for businesses, organizations and individuals. Services include offering
current,

deposit

and

saving

accounts

as

well

as

giving

out

loans

to businesses. Commercial banks make their profits by taking small, short

term, relatively liquid deposits and transforming these into larger, longer maturity loans. This
process of asset transformation generates net income for the commercial bank. Note that many
commercial banks do investment banking business although the latter is not considered the
main business area. Commercial banks are the principal source of credit for all sectors of the
economy comprising millions of individuals and families and for multinational units of
government. Moreover people associated with businesses ranging from grocery stores to
automobile dealers, are largely depend on banks for major source of their credit to stock the
shelves with merchandise or to fill a dealer. The banks help business owners manage their
accounts, including checking, savings and loans. The sources of funds in commercial banks are
varied.
Bank Asias main sources of financing are basically the deposits, Shareholders capital, retained
earnings, reserve funds and central bank financing and borrowing from other banks.

Bank Asia at a glance

Bank Asia Limited is a scheduled commercial bank in the private sector established under the
Bank Company Act 1991 and incorporated in Bangladesh as a public limited company under the
Companies Act 1994 to carry out banking business in Bangladesh. Bank Asia was launched by a
group of successful entrepreneurs on November 27th, 1999. The initial paid up capital of the
Bank is over Tk. 210.00 million.
Within a short span of time, Bank Asia Limited has established itself as one of the fast growing
local private banks. The opening of the Principal Office at Motijheel, 29 April 2000 was a big
leap forward. The opening of Gulshan Branch in Dhaka, and the Agrabad Branch in the
commercial hub of Chittagong, further expanded Bank Asias horizon to bring its services to
people. In 2001, the Bank set a milestone by acquiring the business operations of the Bank of
Nova Scotia in Dhaka, first in the banking history of Bangladesh. In the beginning of the year
2002 the Bank also acquired the Bangladesh operations of Muslim Commercial Bank Limited
(MCBL).
Bank Asia started its journey on November 27, 1999 with a view to providing the best quality
technology driven services in banking sector. Since inception it has been able to cover major
parts of the country by extending and expanding its network opening branches, agent banking
and mobile financial services (Hello) outlets. The bank started its Islamic banking operation in
2008. It established the 1st subsidiary company Bank Asia Securities Limited on March 16,
2011, then BA Exchange Company (UK) Limited in London, United Kingdom on May, 2011
and recently BA Express USA Inc. in Jamaica, New York, USA on June 01, 2014. At present
Bank Asia has 91 Branches, 5 Islamic Windows, 6 SME Service Centers, 1 Off-shore Banking
Unit and 3 Subsidiaries. With an aim to serve the unbanked people, Bank Asia is now operating
EBEK (Ektee Bari Ektee Khamar) banking services to 35 districts having 252 upazillas and
1,320,300 beneficiaries. The Bank has implemented 49 agent banking outlets in 17 districts to
provide banking services to geographically disperse rural poor segment of the society. With the
same mission under Hello mobile financial services, the bank has already covered 62 districts
with 80 distributors, 12,677 Agents and 1, 87,621 registered customers.

A DREAM COMES TO REALITY

FAITHFUL AND EFFICIENT WORKFORCE

Bank Asia has the right blending of talented youth and experienced seniors workforce which is
truly efficient and dynamic. Mr. Md. Mehmood Husain who has more than 30 years successful
banking experience leads the team from the forefront as President and Managing Director. At the
end of 2014, the bank has 1,773 employees including 301 executives and 1,472 officers to serve
its clients across the country. Bank Asia provides a work friendly elegant environment to its
employees. Its unique reward and performance appraisal system encourage employees to give
their best to serve the Bank and its stakeholders.

GIVING BACK TO THE UNDER PRIVILEGED & CONCERN TO

ECOLOGY
Bank Asia always tries to make a better society by working and donating in different sectors such
as, education, health, disaster management, sports and some other sector including the free eye
camp and ophthalmological operation facility. Bank Asia has been recognized as one of the top
10 commercial banks for its contribution to green banking by Bangladesh Bank. In addition, it
streamlines green banking initiatives in its in-house management and investing in environment
friendly projects and participating in environment protecting activities.

EAGERNESS FOR HIGH-TECH SOLUTION

Bank Asia always welcomes the innovation for the operation of the banking activities as well as
reporting systems. Bank Asia has associated Islamic banking, Off-shore banking, SME financing,
Agent Banking, EBEK, Remittance channeling & many more specialized services with its core
banking activities. To excel in this new era of technological triumph, Bank Asia has successfully
introduced mobile financial services (with a brand name Hello), Utility bill payment & Fees
collection through Online, cutting edge ICT, state of the art network solution, 24/7 ATM service
& many other e-products.

CREDIT RATING
Credit Rating Agency of Bangladesh Limited (CRAB) awarded Bank Asia Limited AA3 in the
Long Term and ST-2 rating in the Short Term based on the financials of 2013.

ACCOLADES & RECOGNITION

Bank Asia was awarded several times by the reputed organizations. Bank Asia garnered second
position from the Institute of Chartered Accountants of Bangladesh (ICAB) for Best Presented
Annual Reports-2013 in Bangladesh. Bank Asia received Certificate of Merit from SAFA (South
Asian Federation of Accountants) for best presented Annual Report Awards and SAARC
Anniversary Awards for Corporate Governance Disclosures 2013 and Certificate of Merit from
the Institute of Cost and Management Accountants of Bangladesh (ICMAB) for Best Corporate
Award-2013. Moreover, it achieved SRA 14 for Most Impressive Report 2013 by NCSR
(National Centre for Sustainability Reporting) Jakarta, Indonesia for Sustainability Report 2013.

GOALS:
Sustainable growth: Synergies between new knowledge and human capital for sustainable
economic growth.
Capital stewardship: Preservation and enlargement of multiple forms of capital; like
intellectual, natural, financial, organizational, social; all of which contribute to long term value
creation.
Accelerating financial inclusion:

Accelerate progress towards financial inclusion with

technology like ATM, mobile phone, smart card based banking services and renewable energy
generation projects especially in rural areas.
Differentiating value added services: Strong focus on extremely cost-efficient and green
services through Internet banking, electronic fund transfer, automated checks clearing, e-bank
statement, SMS alert etc.
Going green: Quantification of in-house facilities and energy consumption to promote paperless
office and enhance energy efficiency. Greater emphasis on green banking projects.
Leader in business: Create new dimension in the syndication and structured financing. Grow
with export. Well diversified portfolio.

Particulars

2013

2014

Change

Total Asset
Deposit
Loans & Advances
Import
Export
Inward Remittance
Operating Profit
Profit after Tax & Provision
Shareholders Equity
Classified Loans
Earnings Per Share-after split (Taka)
Net Asset Value Per Share-after split (Taka)
Returns on Equity

163778
133489
104911
110738.08
71968.83
34334.40
5,415.76
1,459.82
14,617.70
6,200.55
1.91
21.07
10.55%

182731
140869
116809
110192.54
77646.91
41732.50
5,778.83
2,218.69
16,864.42
5,878.79
2.91
22.10
14.09%

11.57%
5.53%
11.34%
-0.49%
7.89%
21.55%
6.70%
51.98%
15.37%
-5.19%
52.36%
4.89%
33.55%

FINANCIAL ANALYSIS

Sources of Financing
Banks need financing to fund operating constraints, invest in short- and long-run projects,
acquire or merge with other organizations and develop new products. They also raise funds to
meet financial market requirements or regulatory minimum balances. Corporate finance

specialists help banks evaluate and identify adequate capital structure models. Entities may
receive financing from investors or regulators.
In general, a bank may have two major sources of funds which are needed for its business
operations. They are internal sources of funds and external sources of funds.

Sourc
es of
funds
Intern
al
Sourc
es
Capit
al

Reserv
e

Extern
al
Sourc
es
Deposi
t

Borrowin
g

Sources of fund: Theoretical aspects

Commercial bank uses various categories of sources to raise the funds. The major source of
commercial bank funds are summarized as follows:
Capital:
The bank capital represents the net worth of the bank or its value to investors. A bank's capital
can be thought of as the margin to which creditors are covered if a bank liquidates its assets.
Loan-loss reserves or loan-loss provisions are amounts set aside by banks to allow for any loss in
the value of the loans they have offered.

Capital can be classified as1. Primary capital

2. Secondary capital
Primary capital
Primary capital results from issuing common or preferred stock as primary or secondary. Banks
may raise funds on securities exchanges by selling shares of equity also called stocks. Buyers of
equity or shareholders receive periodic dividends. They also make profits when share prices
increase. Banks not listed on securities exchanges may acquire funding through private share
sales to investors such as other banks, insurance companies or private equity firms.
Secondary capital
Secondary capital results from issuing subordinated notes and bonds.
Capital can also be categorized by the following:
Paid-up Capital
Paid-up/ share capital indicates the contribution made by the shareholders of the bank. By
definition, it is the part of subscribed capital which has been called-up and paid, while subscribed
capital is the part of the Authorized capital which has been issued and taken up by the public
including shares issued to and paid by sponsor.
Reserve Funds
A commercial bank builds a reserve fund with deposits so it can pay interest on accounts and
complete withdrawals. Ideally, a banks reserve fund should be equal to its capital. A bank
builds its reserve fund by accumulating surplus profits during healthy financial years so that the
funds can be used in leaner times. On average, a bank tries to accumulate a fixed percentage of
its net profit to build and maintain its reserve fund. It actually belongs to the shareholders. The
accumulation of such retained reserves is an essential condition for financial soundness,
stability and growth of the bank to fulfill special roles assigned to them from time to time.

Besides, such reserves provide a cushion for meeting unforeseen contingencies. In the event of
heavy losses the bank can draw upon its Reserve Fund. The reserve fund operates as
an additional security to the banks customers.

Retained Earnings
Banks use retained earningsportions of income not distributed as dividendsto fund shortor
long-run investment needs. They analyze whether internal costs of funds are lower than
external costs. Entities usually dont use all profits retained for financing purposes because they
need to keep minimum cash balances to meet operating or regulatory requirements. A lot of
commercial banks earn retained earnings or fees to help fund their business. A retained earning
can be collected through overdraft fees, loan interest payments, securities and bonds.
Banks also charge fees for providing customers with services such as maintaining an account,
offering overdraft protection and also monitoring customers credit scores.

Deposits
Deposits from public represent by far the most powerful source of fund to a bank, accounting
for over 90% of the total. The largest source by far of funds for banks is deposits; money that
account holder entrust to the bank for safekeeping and use in future transactions, as well as
modest amounts of interest. Generally referred to as Core Deposit, these are typically the
checking and savings accounts that so many people currently have. These deposits are keys to a
banks potential growth. These funds are liabilities of the bank, because these have to return to
the owners on demand. Therefore, keeping the needs and interests of various sections of
society, banks formulate various deposit schemes. Generally, there are three types of deposits
which are as follows:

Current Deposits
The depositors of such deposits can withdraw and deposit money when-ever they desire. Since
banks have to keep the deposited amount of such accounts in cash always, they carry either no
interest or very low rate of interest. These deposits are called as Demand Deposits because these
can be demanded or withdrawn by the depositors at any time they want. Such deposit accounts
are highly useful for traders and big business firms because they have to make payments and
accept payments many times in a day.
Fixed Deposits
These are the deposits which are deposited for a definite period of time. This period is generally
not less than one year and, therefore, these are called as long term deposits. These deposits
cannot be withdrawn before the expiry of the stipulated time and therefore, these are also called
as time deposits. These deposits generally carry a higher rate of interest because banks can use
these deposits for a definite time without having the fear of being withdrawn.
Saving Deposits
In such deposits, money up to a certain limit can be deposited and with-drawn once or twice in a
week. On such deposits, the rate of interest is very less. As is evident from the name of such
deposits their main objective is to mobilize small savings in the form of deposits. These deposits
are generally done by salaried people and the people who have fixed and less income. Apart from
these traditional fixed deposits, saving deposit, and current accounts, banks in modern times take
the form of numerous deposit schemes with a wide range of interest for a variety of maturities to
meet diverse needs of the public and to attract different class of savers. The efficiency of depends
on its ability to attract deposits
Borrowings:
Borrowings from Central Bank and other banks or institutions are also sources of raising funds
of commercial bank. But, by nature, those are emergency sources and are restored to only when
the bank is unable to meet the commitments of its own. Therefore the sources of borrowings areCentral Bank

The Central Bank will provide liquidity to the banks and other institutions when sour aces dry
up. They may grant accommodation to scheduled banks by way of Rediscounting or purchase of
eligible bills and Loans and advances against certain securities.
Borrowing from interbank:
The interbank lending market is a market in which banks extend loans to one another for a
specified. Such loans are made at the interbank rate (also called the overnight rate if the term of
the loan is overnight).These are- 1. Interbank deposit sources 2. Interbank call money 3.
Repurchase agreement.
Borrowing from international financial institution
These are provide by the international institution like, International Monetary Fund (IMF), World
Bank and its affiliated bodies, ADB, IDB and other foreign agencies/development partners.

Sources of Fund for Bank Asia

Deposit:
The deposit of the Bank Asia stood at Tk. 140,869.29 as on December 31, 2014 as against TK.
133,489.37million of 2013 registering an increase of TK.7380 million. Deposit is the life blood
of the Bank. Bank has given utmost importance in mobilization of deposit introducing a few
popular and innovating schemes.

Deposit Strategy:

Taping different government agencies e.g. Foreign Missions, Roads & Highway, LGED,
Bangladesh Bridge Authority etc, and also other different corporate houses, e.g. Foreign

Air Lines, Telecom companies etc. and maintaining regular intense social interaction.
Cross Selling of different products including retail to corporate customers.
Exploiting the growing rural deposit basket setting- up smaller size low cost rural
branches and most important channels like EBEK (Ektee Bari Ektee Khamar), Agent

Banking etc.
Offering cash management services, i.e. collection of institutional accounts and effective

use of EFTN service to ensure fast & secure cash service.

Rigorous CASA campaign, Hajj deposits campaign and so on.
Exploit mobile banking services to tap huge low ticket domestic remittance and mobile
wallet to facilitate retail shopping.

Total Deposits
2010
86,365.64

(amount in million taka)

2011
95,131.10

2012
110,061.78

2013
133,489.37

2014
140,869.29

160000
140000
120000
100000

Current

80000

Savings
Fixed

60000

Total

40000
20000
0
2010

2011

2012

2013

2014

Current Deposits

(amount in

taka)
2010
8,866,798,221

2011
12,024,446,868

2012
15,063,776,817

2013
17,124,519,794

Fixed Deposits

2014
21,511,648,552
(amount in

taka)
2010
65,887,803,875

2011
72,946,147,792

2012
82,881,733,772

2013
101,869,884,971

Saving Deposits

2014
101,002,401,997
(amount in

taka)
2010
7,947,958,226

2011
9,060,930,520

Deposit Products:
Saving Account
Current Account
Short Notice Deposit
Fixed Term Deposit

2012
10,613,363,599

2013
12,827,249,596

2014
16,547,202,983

 Foreign Currency Account

Deposit Pension Scheme
Monthly Benefit Scheme
Double Benefit Scheme
Triple Benefit Scheme
Bank Asia Sanchoy Plus
Shareholders Capital:
While deposits are the primary source of loanable funds for almost every bank, shareholder
equity is an important part of a banks capital. Several important regulatory ratios are based upon
the amount of shareholder capital a bank has and shareholder capital is, in many cases, the only
capital that a bank knows will not disappear. Common equity is straight forward.
This is capital that the bank has raised by selling shares to outside investors. While banks,
especially larger banks, do often pay dividends on their common shares, there is no requirement
for them to do so. Banks often issue preferred shares to raise capital. As this capital is expensive,
and generally issued only in times of trouble, or to facilitate an acquisition, banks will often
make these shares callable. This gives the bank the right to buy back the shares at a time when
the capital position is stronger, and the bank no longer needs such expensive capital. Equity
capital is expensive, therefore, banks generally only issue shares when they need to raise funds
for an acquisition, or when they need to repair their capital position, typically after a period of
elevated bad loans. Apart from the initial capital raised to fund a new bank, banks do not
typically issue equity in order to fund loans.
In the year of 2003, the bank went public by issuing 3,000,000 ordinary shares through IPO and
pre-IPO placement. It received overwhelming response from the investors from both home and
abroad and the Public offering was oversubscribed by more than 57 times the offered amount.
Capital planning
Banks capital planning is a dynamic, ongoing and forward-looking to incorporate changes in a
banks strategic focus, risk tolerance levels, business plans, operating environment, or other
factors that materially affect capital adequacy.
Capital planning assists the banks Board of Directors and senior management to:

i. Identify risks, improve banks understanding of overall risks, set risk tolerance levels,
and assess strategic choices in longer-term planning,
ii. Identify vulnerabilities i.e. concentrations and assess their impact on capital,
iii. Integrate business strategy, risk management, capital and liquidity planning decisions,
iv. Have a forward-looking assessment of the banks capital needs, including capital
needs that may arise from rapid changes in the economic and financial environment.
Banks capital planning considers both short-term and long-term capital needs and is coordinated
with a banks overall strategy and planning cycles, usually with a forecast horizon of at least five
years.
Paid-up Capital
2010
3,002.74

(amount in million taka)

2011
5,254.79

2012
6,305.75

2013
6,936.32

2014
7,629.96

100%
80%
60%
40%
20%
0%
2010

2011

2012

2013

2014

Reserve Funds:
Reserves funds are another important source of financing for commercial banks. Commercial
banks basically build a reserve fund with deposits for paying interest on accounts and complete
withdrawals. A bank builds its reserve fund by accumulating surplus profits during healthy
financial years so that the funds can be used in leaner times.

Bank Asia is maintaining three types of reserve funds: Statutory Reserve, Revaluation Reserve
and General Reserve and maintain a sound Retained Earnings which is very important source
of financing for Bank Asia

Reserve fund
2010
4,057.20

(amount in million taka)

2011
7,224.14

2012
6,739.42

2013
7,681.38

2014
9,234.47

10000
9000
8000
7000

Statutory reserve

6000

Revaluation reserve

5000

General reserve

4000

Retained earnings

3000

Total

2000
1000
0
2010

2011

2012

2013

2014

Borrowing from interbank:

Bank Asia borrows huge amount of fund from other financial institution as the call money rate
was lower in 2014 than other previous years.
Borrowing from interbank

(amount in

taka)
2010
5,163,774,972

2011
1,226,743,285

2012
3,825,000,476

2013
1,944,757,246

2014
7,846,139,969

100%
80%
60%
40%
20%
0%
2010

2011

2012

2013

2014

Subordinated non-convertible Zero coupon bonds:

Bank Asia has successfully closed its 2nd Bond transaction on February 19, 2015. The entire
process from beginning to end took 10 months starting in May 2014 with Board approval then
holding EGM (Extra Ordinary General Meeting) appointing Standard Chartered Bank as issue
manager, Rouf & Associates as Legal Counselor, CRISL as Credit Rating Agency and Green
Delta Insurance Company as Trustee. The major challenge of the process was to obtain approval
from Bangladesh Securities & Exchange Commission (BSEC) that we obtained on October 29,
2014 then received final approval from Bangladesh Bank on February 10, 2015. Total Bond size
is Tk. 300 crore and is termed as 7 Year Floating Rate (11.50% to 14.00%) Non-Convertible
Subordinated Bond and issued through 100% private placements to 8 investors viz. Sonali Bank
Limited, Mercantile Bank Limited, Janata Bank Limited, Agrani Bank Limited, One Bank
Limited, Rupali Bank Limited, Pubali Bank Limited and BRAC Bank Limited.

Subordinated non-convertible Zero coupon bond

(amount in

taka)
2010
-

2011
-

2012
599,998,411

2013
599,998,411

2014
449,036,430

100%
80%
60%
40%
20%
0%
2010

2011

2012

2013

2014

Conclusion

Bank Asia is currently enjoying a very good position in banking sector, but it is very important
for the bank to have up to date information of recent situations and proper planning and
policies so that the bank can always have position in the list of market leaders.
Funds are the life blood for a bank. To provide the best services to its customer a bank must
ensure the adequate level of funds. It also keeps funds available for meeting any liquidity and
solvency risk. Funds are also necessary for meeting capital requirement by the regulators.
Bank Asia as a leading bank maintains a sound track record of funding.