Npls

In: Business and Management

Submitted By shsentu
Words 6159
Pages 25
AN INVESTIGATION OF THE RELATIONSHIP BETWEEN NON-PERFORMING LOANS, MACROECONOMIC FACTORS, AND FINANCIAL FACTORS IN CONTEXT OF PRIVATE COMMERCIAL BANKS IN BANGLADESH

by

Syeda Zabeen Ahmed ID # 0120269

An Internship Report Presented in Partial Fulfillment of the Requirements for the Degree Bachelor of Business Administration

INDEPENDENT UNIVERSITY, BANGLADESH April 2006

An investigation of the relationship between Non-performing Loans, Macroeconomic Factors, and Financial Factors in context of Private Commercial Banks in Bangladesh

by

Syeda Zabeen Ahmed ID # 0120269

has been approved April, 2006

_________________ Shubhankar Shil Lecturer School of Business Independent University, Bangladesh

TABLE OF CONTENTS
Page List of Tables Abstract 1. Introduction 2. Problem Statement 3. Purpose of the Study 4. Limitations of the Study 5. Research Timeline 6. Review of Literature 6.1 Non-performing Loans 6.2 Development of hypotheses 6.3 Macroeconomic factors and NPLs 6.4 Bank specific indicators and NPLs 6.5 Terms of Credit and NPLs 7. Methodology 7.1 Research Approach 7.2 Sampling Method 7.3 Measure of variables 7.4 Data Collection Procedure 7.5 Data Analysis 8. Results 8.1 Descriptive 8.2 Correlations 8.3 Regression 9. Significant of the Study 11. Conclusion Reference Appendix 1 I 1 1 2 2 3 3 3 4 5 6 7 7 8 8 8 8 9 9 10 10 11 12 13 13 14 16

List of Tables
Page 1. Demographics of respondents 2. Occupational experience of respondents 3. Responsibility statements
4. Reliability statements

12 24 25 26 29

5. Decision usefulness

An investigation of the relationship between Non-performing Loans, Macroeconomic Factors, and Financial Factors in context of Private Commercial Banks in Bangladesh

Abstract
Based on the studies by Ranjan, and Dhal (2003), this study aims to investigate the relationship between Non-performing Loans, Macroeconomic Factors, and Financial…...

Similar Documents

Non Performing Loan of Sonali Bank Limited Rajshahi Corporate Branch

...sustained and rapid economic progress. Among various indicators of financial stability, banks’ non-performing loan (NPL) assumes critical importance since it reflects on the asset quality, credit risk and efficiency in the allocation of resources to productive sectors. Nonperforming loans (NPLs) refer to those financial assets from which banks no longer receive interest and/or installment payments as scheduled. They are known as non-performing because the loan ceases to “perform” or generate income for the bank. Choudhury et al. (2002: 21-54) state that the nonperforming loan is not a “uniclass” but rather a “multiclass” concept, which means that NPLs can be classified into different varieties usually based on the “length of overdue” of the said loans. NPLs are viewed as a typical byproduct of financial crisis: they are not a main product of the lending function but rather an accidental occurrence of the lending process (Woo, 2000: 2). This is because NPLs can bring down investors’ confidence in the banking system. Only for a few defaulting borrowers, the banks suffer, depositors suffer, performing borrowers suffer, shareholders suffer, Government suffers and consequently economy and the people of the country suffer. The latest data reveal that in Bangladesh banking sector the amount of NPL is Tk 2572.65 crores (7.17% of total loans) up to September 2011. The ratio of NPL was as high as 41.1% in 1999, which came down gradually to the present level as mentioned.......

Words: 1954 - Pages: 8

Marketing Pland for Launching of New Product

...no such specific guidelines and policies from its regulatory body DDA, Nepalese pharmaceuticals feel the gap for visionary support from government. Though the country is self reliant in various categories the chunk of market share is still being enjoyed by foreign and Indian companies due to the lack of specific guidelines. Nepal pharmaceutical Laboratory is going to introduce its new product in the market where its competitors already exists. Osamax competing brands are : RESTOFOS – Sun Pharmaceuticals – Indian company OSTEOFOS – Cipla Pharmaceuticals – Indian company FOSSIL – Magnus Pharmaceuticals – Nepali company Since it is difficult to adopt differentiation strategy in pharmaceutical products in terms of product and its features, NPL has to work on other aspects to add value to the product and gain competitive advantage over competitors’ product. Market description Currently total market size of pharmaceutical product is 12 billion and the share of Nepali companies in the market is 35 % with 45 manufactures operating and (5– 18) in the pipeline. With an annual growth rate of 19 %, this sector is one of the fastest growing industries. This sector is contributing around 12 billion to nation’s economy of which domestic industry accounts for approximately 4 billion. This sector has become strong and stable in various aspects . Report of 2006: The study shows the consumption of allopathic drugs in the fiscal year 2061/62 (2004/05) has been Rs. 10659 millions. The annual......

Words: 4869 - Pages: 20

Banking in Vietnam

...ongoing commentary has been both absorbing and humorous. The first red flag was raised by ratings agency Fitch in August, 2011. At the time, reported system NPLs for Vietnamese banks was about 2.7 per cent. But, Fitch estimated that 13 per cent was a more realistic number. The State Bank governor acknowledged late last year that the real number was 8.82 per cent. We are in the middle of reporting season and the highest NPL number so far publicly reported by a Vietnamese bank is less than 4 per cent. The real number is subject to much debate. The recent purchase by Japanese super bank, Bank of Tokyo- Mitsubishi UFJ of 20 per cent of Vietinbank values it at nearly $4 billion, but with a market capitalisation of just $2.5 billion just prior to the transaction. It seems that the clouded NPL issue has not significantly affected valuations of some Vietnamese banks and the Vietnam long-term growth story remains at the front of minds for international investors. The single biggest question in the banking sector is how to deal with the current NPLs and I’m not going to comment any further on resolution of this issue in this article. The second biggest question is how to make sure that the NPL issue doesn’t repeat itself in the future, and this is the focus of the remainder of this article. Nearly all articles focus on an NPL cure or resolution while few have focused on prevention. Prevention is better than cure, especially as it relates to bad credit decisions, and this......

Words: 1095 - Pages: 5

Nol of Vietnam Banking System

...B/ The problem of NPLs in Vietnamese bank: I/The Definition of Non-Performing Loans (NPLs): Based on IMF: A loan is non performing when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be made in full. Based on the SBVDecision 493/2005/QD-NHNN dated 22 Apr 2005: NOL are prescribed to only debts cannot afford to pay both principal and interest or to fall into this situation. Within 3 months, if the debts that cannot afford to pay will be provided for bad debt. However, it also depends on the terms agreed upon by a loan agreement. Based on this Decision the NOL is classified in to 4 groups as follows: • NPLs Group 1 (Debts to which attention shall be paid) : includes debts overdue for less than 90 days and reschedule debts that are now no longer due according to reschedule terms. This group shall be provisioned at the rate of 5% • NPLs Group 2 (Sub-standard): includes debts overdue between 90 and 180 days and reschedule debts overdue for less than 90 days according to reschedule terms. This group shall be provisioned at the rate of 20% • NPLs Group 3 (doubtful debts): includes debts overdue for between 181 and 360 days and reschedule debts that are overdue for between 90 and 180 days according to the reschedule terms. This group is subject to a......

Words: 920 - Pages: 4

Bad Debts

...DIWATA S. SORIANO CURRENT ISSUE ANALYSIS Banks’ bad loans down to 2.05% as of Sept By Prinz P. Magtulis (The Philippine Star) | Updated December 1, 2012 - 12:00am MANILA, Philippines - The non-performing loan (NPL) ratio of universal and commercial banks showed a slight improvement in the first three quarters of the year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday. Big lenders’ NPL ratio improved to 2.05 percent as of September from 2.46 percent a year ago. It was also slightly better than the 2.08 percent in the first eight months of the year. Excluding bank loans among themselves, the ratio also improved to 2.15 percent from 2.46 percent a year ago and 2.08 percent as of August, data showed. NPL pertains to loans that remained unpaid 30 days after due date. The ratio reflects the proportion of NPL against banks’ total loan portfolio. A lower ratio indicates a healthy balance sheets for lenders allowing them to lend more to drive consumption and investment, which in turn, could boost economic growth. The “combined effect” of extending more loans and having some bad ones paid contributed to the industry’s better performance, the central bank said. Business ( Article MRec ), pagematch: 1, sectionmatch: 1 A total P3.410 trillion worth of loans were granted during the first nine months, up 12.91 percent from last year’s P3.020 trillion. The latest figure......

Words: 672 - Pages: 3

Analysis of Financial Report

...PERFORMANCE RATIO: AB Bank Ltd. * Nonperformance Loan To Total Loan = Nonperforming Loans / Total Loans = Tk. 2,668,797,758 / Tk. 94,638,218,363 = 2.82% Douch Bangla Bank Ltd. * Nonperformance Loan To Total Loan = Nonperforming Loans / Total Loans = Tk. 884,088,319 / Tk. 59,144,393189 = 1.50% AB Bank Ltd. * NPL Loans to Total Assets = Nonperforming Loans / Total Assets = Tk. 2,668,797,758 / Tk. 152,962,836,671 = 1.75% Douch Bangla Bank Ltd. * NPL Loans to Total Assets = Nonperforming Loans / Total Assets = Tk. 884,088,319 / Tk.100, 782,850,082 = 0.8772% AB Bank Ltd. * Net Charge Offs To Total Loans = Net Charge Offs / Total Loans = Tk. 10,436,688,668 / Tk. 94,638,218,363 = 11.03% Douch Bangla Bank Ltd. * Net Charge Offs To Total Loans = Net Charge Offs / Total Loans = Tk.2, 608,267,739 / Tk. 59,144,393189 ...

Words: 2731 - Pages: 11

Thai Banking System

...the high demand from large corporations. This is due to the expectations of economic recovery and better investment conditions. Consumer loan demand is also expected to rise in Q3, especially by way of credit cards and other consumer loans. This shows that financial institutions are expecting an increase in private consumption (although they have tightened standard for consumer credit due to the worrying borrower’s credit worthiness and economic slowdown in the last period) Private credit to GDP The most recent value for the domestic credit to private sector (%GDP) was measured at 131.92 in 2011. Corporate and consumer NPLs There has been deterioration in loan quality, the evidence of which lies in the NPL 279.8 THB billion (the figure is mostly comprised of consumer and SME loans as opposed to corporate loans). The ratio on gross NPL and net NPL to loans are 2.3% and 1.1% respectively. REF: http://www.tradingeconomics.com/thailand/loans-to-private-sector http://www.bot.or.th/English/EconomicConditions/Thai/DocLip_credit/LoanSurveyEN_Q22014.pdf http://www.tradingeconomics.com/thailand/domestic-credit-to-private-sector-percent-of-gdp-wb-data.html http://www.bot.or.th/Thai/PressAndSpeeches/Press/News2557/n1857e.pdf...

Words: 283 - Pages: 2

Mgmt 520 Week 2

...contaminants throughout the United States of America. The National Priorities List (NPL) is what the populated list of threats is placed on. The EPA utilizes the NPL in order to know which sites to further investigate and the extent of the site’s environmental risk. Once the EPA completes an investigation they are able to determine if the site has to provide any CERCLA-financed actions to include payments to SARA. Rule 61 is to request that the three sites in Alabama, Indiana, and Michigan be added to the General Superfund section of the NPL. 3. Write the public comment that you would submit for this proposal. Explain briefly what you wish to accomplish with your comment. One of the things that were referenced in the document was the Hazard Ranking System (HRS). The EPA utilizes the HRS in order to score and determine whether the facility is placed on the NPL. After reading throughout the document I would like to see more information on the scoring system and how much effect it takes into placing sites on the NPL. The current three sites on this document have scored a 28.50 or above which is why they are being placed on the list. I would like to see more clarification about the leeway available for sites. If a site scores a 28.00 on the HRS are they not required to be placed on the NPL? Furthermore, if a site scores a 28.00 on the HRS and they are not required to be placed on the NPL then what is required of that site? Better understanding of the scoring on the HRS......

Words: 954 - Pages: 4

Bank Industry

...Advances to Deposits = Gross Advances/ Deposits*100 The ratio expresses the percentage of gross advances to deposits and expresses the utilization of deposits in the core business of a bank, i.e., intermediation. 3.3: Assets Quality Ratios 3.3(a): Non-Performing Loans (NPLs) to Gross Advances = Non-Performing Loans (NPLs) / Gross Advances*100 This ratio expresses the quality of loan portfolio of a bank. It shows the percentage of NPLs as gross advances made by a bank and evaluates assets quality based on loan portfolio. 3.3(b): Provision against NPLs and Gross Advances = Provision against NPLs/ Gross Advances*100 The ratio between provisions against classified loans/advances to gross advances reflects the quality of advances of banks and DFIs. 3.3(c): NPLs to Equity Ratio = Non-Performing Loans (NPLs)/Total Shareholders’ Equity*100 The ratio between NPLs to shareholders’ equity indicates the exposure of the common shareholders to NPLs. 3.3(d): NPLs Provision to NPLs Ratio = NPLs Provision/ Non-Performing Loans (NPLs)*100 The ratio reflects what percentage of provision has been made against NPLs. 3.4: Capital/Leverage Ratios 3.4(a): Capital Ratio = Total Shareholders‟ Equity /Total Assets*100 The ratio between shareholders’ equity and total assets expresses the percentage of equity in total assets. 3.4(b): Contingent Liabilities and Commitment to......

Words: 15156 - Pages: 61

Bank Performance

...contributor loans and advances increased by 32 percent at the same time and deposit growth was 19 percent compared to that of 2013 audited financials. Loan to Deposit ratio is 91% in 2014(Q3), which was 82% in FY’13. ROA and ROE of the Bank was 12.2 percent and 0.7 percent respectively in 2014(Q3). NPL (nonperforming loan) ratio was 3.1 percent in FY’13, which was 4.6% in FY’12. Key Financials Particulars Net Interest Income Investment Income Operating Income Operating Expense Total Provision Tax Net Profit After Tax Trust Bank Limited (DSE: TRUSTBANK) 2012 1,913.0 913.6 3,757.3 1,929.1 876.2 769.3 182.7 13,675.8 58,599.1 83,063.0 6,849.8 96,339.3 426.2 0.4 16.1 0.2% 2.9% 4.6% 2013 1,439.2 1,586.6 4,174.4 2,238.1 772.8 841.5 322.0 19,060.1 83,798.4 102,523.9 7,200.2 118,308.5 426.2 0.8 16.9 0.3% 4.6% 3.1% Figure in Million 9M, 2014 1,995.7 1,366.0 4,467.3 1,763.0 641.9 1,125.1 937.3 22,637.0 110,248.9 121,614.3 8,106.1 150,085.2 426.2 2.2 19.0 0.7% 12.2% - Investments/Investments in Shares & Securities Loans and Advances [Conventional Bank] /Investments [Islami Bank] Deposit & Other Shareholders' Equity Total Assets Total No. of Shares EPS (Restated) BVPS (Restated) ROA ROE NPL(%) Analysis of Performance: Social Islami Bank Limited (DSE: SIBL) Net interest income in 2014 (Q3) grew by 13 percent compared to 2013 (Q3). Income from investment was increased by 6.56 percent, where income from commission, exchange and brokerage increased significantly by 29.35 percent in......

Words: 1033 - Pages: 5

Faces of Indebtness

...borrowers had to default on their loans. “Non-Performing Loans (NPLs)’s a deduction from the operating income and therefore substantially reduce the profit for the year,” he said. Indeed, the bank’s net profits somewhat increased to Shs 130 bn from Shs 121bn a year earlier, indicating a rise of only Shs 9bn compared to an increase of almost Shs 50 bn in net profits between 2010 and 2011. However, Odera said they had not lost all hope as a non performing loan could become performing if it has been restructured and the new terms and conditions are being met. “In other words we can adjust either the repayment period, or the repayment rate (or both) in order to better cushion the borrower,” he said. As a measure to curb the growth of these loans, Odera said they are now focusing more on “the borrower’s ability to withstand the economic vagaries that might arise.” “This leads to far more selective lending than before,” he added. Some analysts have argued that this should serve as a warning to financial institutions that have been persuading almost forcing people and companies to take loans even when they have no ability to generate income to pay back. Odera said if this happens anywhere then it is “most unfortunate.” “Certainly Stanbic Bank does not subscribe to any such dealings and any staff found guilty of such would be immediately dismissed as this is in violation of bank policies and procedures,” he said. At Centenary Bank, NPLs/ loan default rose from Shs 12.4bn to Shs......

Words: 8289 - Pages: 34

Mister

...Corporate NPL in Poland Challenging the status quo in one of the most competitive markets by tailoring unique transactions and creating ingenious know how in collection, P1 invests in NPL portfolios and makes two digit IRR in cash. Corporate Debt Servicer Pragma Inkaso • Pragma Inkaso SA. Group has existed since 2002 and it focuses on the actions in the field of company debt collection and business financing. • With over 5 thousand clients it has been the leader of the corporate debt market for several years now. • In 2013, the composition of the Group was enhanced with a securitization fund – Pragma 1 FIZ NFS and a business unit responsible for the buyout of debt from bulk suppliers and banks. • Pragma Inkaso is quoted on the Warsaw Stock Exchange. Corporate Debt Servicer The Company Corporate Debt Servicer Pragma Inkaso Soft Collection / Deal Makers – 15 people and growing Hard Collection – 17 people External Field Collection – 40 people Litigation – 20 lawyers (8 advocates, 12 sollicitors) NPL origination and management – 6 managers and analysists Corporate Debt Servicer Pragma Inkaso is an NPL expert, which - thanks to the thorough knowledge on the market - moves on its most difficult area – small & medium enterprise debt and corporate debt. Corporate Debt Servicer Debt market in Poland Sold retail debt 2013 2014 2015 PLN 11.2 billion PLN 14 billion (25% increase) PLN 20......

Words: 830 - Pages: 4

Major Problems of the Banking Industry and Strategies to Overcome Them: a Study on Bangladesh.

...accountability. A perfect example is the Hallmark scandal of the state-owned Sonali Bank, which occurred due to the lack of both transparency and accountability. 4.2 Low Quality of Asset: The uses of funds are the main asset in the banking industry. There are different kinds of uses of funds such as cash, invest in securities, federal fund, loan, repurchase agreement, fixed asset, bank loans etc. The most important indicator intended to identify the asset quality in the loan portfolio is the ratio of gross non-performing loans (NPLs) to total loans and net NPLs to net total loans. It’s happening when the individuals or companies to whom the loan is landed, they are not able to repay the loan or they are not willing to repay the money. It is obvious that NPLs reduce banks’ profitability, as banks cannot appropriate interest income from their classified loans. Because of NPLs loan able funds are reduced by stopping recycling. . And those adverse impacts of NPLs on banks’ overall financial health like low profitability and low capital base are clearly reflected in the Bangladesh banking sector. Private bank was allowed to conduct banking operations in order to increase, competition, the reasons, the efficiency and productivity of the banking sector. We know that Bangladesh is a developing country, increasing a number of private banks created an unhealthy competition and the efficiency of the banking sector did not increase rather the credit discipline was further......

Words: 5756 - Pages: 24

Nestle Report

...It is offering 75 brands of bottled waters worldwide. Nestlé Pure Life (NPL) is one of them that was first offered in Pakistan by Nestlé Pakistan Limited in 1998. People felt need of Pure, safe and clean water because of impurities in water especially in the industrialized cities like Karachi, Lahore, Faisalabad etc. Nestlé identified this opportunity and lunched NPL that satisfied the customer needs and Nestlé become market leader in the water industry. The customers of NPL showed interest on NPL because of trust on Quality of Nestlé, at the heart of which there are qualitative products and its long term commitment to deliver better products to consumers. Being the market leader, the market share of NPL is 78% that is much higher than its competitors. NPL is passing through its Growth stage (of Product Life Cycle) i.e. its sales are increasing tremendously and competitors are entering in the market like Aqua Fina by Pepsi and Askari Waters. There are different SKU’s of NPL to cover a wide market needs like for Home and office delivery there are 3gallon and 5 gallon bottles (bulk usage) and for day to day usage easily carrying light weight like “1.5, 0.5, 0.2 liters” bottles are available in the market. Still Nestlé is working on bringing the changes and innovation in this field. For this it has close relationship with its suppliers and distributors to get their suggestion to improve the quality of NPL. Nestlé Pakistan also has the Customer Service Department with the......

Words: 3361 - Pages: 14

Stress Testing

...tests help the regulators to identify structural vulnerabilities and the overall risk exposure that could cause disruption of financial markets. Its prominence is on potential externalities and market failures. Technique for stress testing • Simple Sensitivity Analysis (single factor tests) measures the change in the value of portfolio for shocks of various degrees to different independent risk factors while the underlying relationships among the risk factors are not considered. For example, the shock might be the adverse movement of interest rate by 100 basis points and 200 basis points. Its impact will be measured only on the dependent variable i.e. capital in this case, while the impact of this change in interest rate on NPLs or exchange rate or any other risk factor is not considered. • Scenario Analysis encompasses the situation where a change in one risk factor affects a number of other risk factors or there is a simultaneous move in a group of risk factors. Scenarios can be designed to encompass both movements in a group of risk factors and the changes in the underlying relationships between these variables (for example correlations and volatilities). Stress testing can be based on the historical scenarios, a backward looking approach, or the hypothetical scenario, a forward‐looking approach. • Extreme Value/ Maximum Shock Scenario measures the change in the risk factor in the worst‐case scenario, i.e. the level of shock which entirely wipes...

Words: 8535 - Pages: 35