Internship Report on

IPDC Finance Limited

Topic: Impact of Covid-19 on Non-Bank Financial

Institutions in Bangladesh.

Submitted to:
Mr. Anwar Zahid
Lecturer, Department of Finance, School
of Business and Entrepreneurship,
Independent University, Bangladesh.

Submitted by:
Ali Ahad Mansur
ID: 1710835
Date of Submission: 25th August 2021
Letter of Transmittal

25th August 2021

Mr. Anwar Zahid
Lecturer,
Department of Finance,
School of Business and Entrepreneurship,
Independent University, Bangladesh.

Subject: Submission of Internship Report

Dear Sir,

With all due respect, I am contented to submit you my Internship Report on ‘Impact of Covid-19
on Non-Bank Financial Institutions in Bangladesh’. The organization I will be representing in this
report is IPDC Finance Limited. I was able to learn various aspects and functions of the Operations
department. It has been a very positive and uplifting experience, as I have practically learnt a lot
that wouldn’t have been possible otherwise.

I feel myself incredibly fortunate to have been given the opportunity to work on this report with
your guidance. I've written this report based on the instructions you've given me. To make the
report interesting and comprehensive, I tried to incorporate all necessary information. Finally, I
want to convey my heartfelt gratitude for your assistance in preparing the report.

Regards,

Ali Ahad Mansur

1710835

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Acknowledgement

I want to use this opportunity to express my gratitude to Mr. Anwar Zahid, who deserves the
highest praise for assisting me with multiple consultations throughout the report. He cheerfully
helped me in all of my challenges and doubts about this report. I am grateful to my honorable
faculty who took the interest in my report and supported me till the end.

I would also like to thank IPDC Finance limited who for giving me this Internship opputunity. The
knowledge and the experience I have gained from this Internship will definitely help me in the
future. I would also like to thank my Organization supervisor Ms. Juhra Nahoor, Officer at
Operations Department of IPDC Finance Limited, who guided me throughout my Internship.
Lastly, I would like to thank everyone who was directly and Indirectly guided and supported me
in making this report.

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Table of Contents
Chapter 1 ......................................................................................................................................... 6
1.1 Company Profile ................................................................................................................... 6
1.1.1 Mission, Vision & Objective ............................................................................................. 6
1.1.2 Corporate Division/ Operation details ............................................................................... 7
1.1.3 Details of products and services ........................................................................................ 8
1.1.4 Philanthropic Activities/ CSR .......................................................................................... 10
Chapter 2 ....................................................................................................................................... 12
2.1 Job Responsibilities ............................................................................................................ 12
2.2 Functions of the department................................................................................................ 12
Chapter 3 ....................................................................................................................................... 13
3.1 Industry Analysis of NBFI Sector in Bangladesh ............................................................... 13
3.2 Main competitor .................................................................................................................. 17
3.3 Ratio Analysis ..................................................................................................................... 18
3.3.1 Return on Assets (ROA) .............................................................................................. 18
3.3.2 Loan to Deposit Ratio .................................................................................................. 20
3.3.3 Current Ratio ................................................................................................................ 22
3.3.4 Net Interest Margin ...................................................................................................... 23
3.3.5 Earnings per share ........................................................................................................ 25
3.3.6 Price-to-earnings ratio .................................................................................................. 28
3.3.7 Efficiency Ratio ........................................................................................................... 30
3.3.8 Capital Adequacy Ratio ............................................................................................... 32
3.3.9 Non-performing Loan Ratio ........................................................................................ 33
3.4 Recommendation and Implications..................................................................................... 36
Chapter 4 ....................................................................................................................................... 37
4.1 Conclusion .......................................................................................................................... 37
References ..................................................................................................................................... 38

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List of Figures
Figure 3. 1 Organization Chart of IPDC Finance Limited.............................................................. 7
Figure 3. 2 Trends in Profitability of NBFIs................................................................................. 15
Figure 3. 3 Trends in Assets, Liabilities & Deposits of NBFIs .................................................... 15
Figure 3. 4 Investment Pattern of NBFIs as of 30 June 2020 ....................................................... 16
Figure 3. 5 Trends in NBFIs' Total, Classified Loan/Leases and their ratios ............................... 16
Figure 3. 6 Market Capitalization of NBFIs ................................................................................. 18
Figure 3. 7 Return on Assets Comparison Graph ......................................................................... 19
Figure 3. 8 Average Return on Assets Comparison Graph ........................................................... 19
Figure 3. 9 Loan to Deposit Ratio Comparison Graph ................................................................. 20
Figure 3. 10 Average Loan to Deposit Ratio Comparison Graph ................................................. 21
Figure 3. 11 Current Ratio Comparison Graph ............................................................................. 22
Figure 3. 12 Average Current Ratio Comparison Graph .............................................................. 23
Figure 3. 13 Net Interest Margin Comparison Graph ................................................................... 24
Figure 3. 14Average Net Interest Margin Comparison Graph ..................................................... 25
Figure 3. 15 Earnings Per Share Comparison Graph .................................................................... 26
Figure 3. 16 Average Earnings Per Share Comparison Graph ..................................................... 27
Figure 3. 17 Price to Earnings Ratio Comparison Graph ............................................................. 28
Figure 3. 18 Average Price to Earnings Ratio Comparison Graph ............................................... 29
Figure 3. 19 Efficiency Ratio Comparison Graph ........................................................................ 30
Figure 3. 20Average Efficiency Ratio Comparison Graph ........................................................... 31
Figure 3. 21 Capital Adequacy Ratio Comparison Graph ............................................................ 32
Figure 3. 22 Average Capital Adequacy Ratio Comparison Graph.............................................. 33
Figure 3. 23 Non-performing Loan Ratio Comparison Graph ..................................................... 34
Figure 3. 24 Average Non-performing Loan Ratio Comparison Graph ....................................... 35

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Executive summary

IPDC Finance has been influential in creating the industrial environment of the country. They are
presently the country's fastest growing financial organization. Their future priority, however, is to
move beyond the figures in order to make a positive influence on society and touch the lives of
many more people by offering affordable home loans, expanding beyond megacities, and
promoting women entrepreneurs and SMEs and bringing convenience at home.

As a student majoring in Finance, I got the opportunity to work at IPDC Finance Limited’s
Operations department. I had a great experience working in the department where I practically
learned a lot and I was able to relate theory to practice.

In this report, the main objective was to evaluate the performance of Non-bank financial
institutions in Bangladesh before and after the Covid-19 pandemic. The sampling process was
done according to the Market capitalization of IPDC finance and its competitors. A total of 9 ratios
were analyzed in order to gain insight of the financial and operational performance of IPDC
finance and its competitors. The ratios used are Return on Assets, Net-Interest Margin, Earnings
per share, P/E Ratio, Current ratio, Loan to Deposit ratio, Efficiency ratio, Capital Adequacy ratio
and Non-performing loan ratio. The ratios are presented in graphs for the years 2016-2020 for 4
Non-Bank financial Institutions. The Average ratio of 2016-2019 has also been compared with
2020, to evaluate the effect of Covid-19 pandemic on Non-Bank Financial Institutions.

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Chapter 1

1.1 Company Profile

IPDC Finance Limited (formerly known as Industrial Promotion and Development Company of
Bangladesh Limited) was established in 1981 with the primary goal of ushering in a wave of
industry in Bangladesh. With such a noble goal in mind, the Company developed innovative
financial products and services that helped us pave the way for Bangladesh's leading corporations.
(IPDC, 2020)

1.1.1 Mission, Vision & Objective

Company Mission: To enable our customers and communities to live unbound and to live to their
fullest potential by extending innovative financial solutions in a friendly, timely, transparent and
cost-effective manner.

Company Vision: To become the most passionate financial brand in the country with a special
focus on youth, women and under-served areas.

Core Values: We will provide exceptional customer service by: • Serving our customers with
passion and honesty • Going above and beyond the call of duty Continually seeking out new ideas.

Core Strengths: • Strong and varied Board of Directors • Skilled management •Quality asset base
• Strong governance and regulatory compliance • Strong Capital base • Remarkable customer
service and experience • Exceptional corporate culture.

Guiding Principles: • Conducting business with the uppermost levels of honesty • representing a
strong determination to win in the market • Encouraging diversity in the workplace •Encouraging
under-served and under-penetrated people with suitable products and services • Supporting the
spirit of teamwork and association • Binding the power of technology to bring better customer
experience and results • Set the standards of corporate citizenship through expansively engaging
in community development initiatives. (IPDC, 2020)

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1.1.2 Corporate Division/ Operation details

Figure 3. 1 Organization Chart of IPDC Finance Limited.

IPDC has divided their business activities into three major strategic business units as a strategic
business orientation. The following is a list of our products and services:

Retail Finance: for the general public to meet the needs of individuals, their retail finance business
provides a comprehensive and intelligent range of personal financial services. They provide
their retail depositors with liability protection through their liability schemes.

Corporate Finance and Advisory: IPDC's corporate finance and advising division offers a broad
range of financial services to businesses. Products under corporate finance include the following:
Lease Finance, Term Loans, Project and Syndication Financing, Short-term Financing and
Investments in Preference and Common Shares.

Small and Medium Enterprises (SMEs): can take use of IPDC's loan solutions, which have a
low interest rate and flexible repayment choices. IPDC has also created SME financing solutions
specifically for women entrepreneurs to help them start new firms, purchase fixed assets, or expand
their facilities. In addition to the lending options that are available. (IPDC,2020)

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1.1.3 Details of products and services

Loan Products:

Home Loans: The company's home and mortgage division offer a variety of home loan solutions
to suit the requirement that is at the top of every individual's wish list: owning a home.

Personal Loans: The company's personal loan division provides loans to meet a variety of personal
demands and standards.

Auto Loan: IPDC's auto loan division specializes in providing car financing products and solutions
to both individuals and institutions.

Term loans: are for small and medium businesses that need money for capital and operating
expenses like balancing production lines, modernizing manufacturing processes, and expanding
production capacity or space, among other things.

Short-Term Financing: The company provides working capital financing to help businesses meet
their day-to-day cash needs for their operations.

Lease Finance: IPDC offers lease finance to small and medium-sized businesses for large industrial
engines, industrial machinery and equipment, commercial equipment, generators, automobiles,
and vessels, among other things.

Project and Syndication: Financing: IPDC offers syndication services, in which it forms
consortiums with banks and financial organizations to raise funding for large-scale projects. IPDC
serves as the lead financial arranger under this agreement. Both greenfield and brownfield
expansions can benefit from project financing.

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Deposit Products:

Savings scheme: Customers' hard-earned small funds are given a great value through IPDC
Finance's deposit plans.

Annual Profit Scheme: A fixed amount of BDT 10,000 must be deposited, with interest paid on an
annual basis.

Monthly Profit Scheme: A fixed amount of at least 8DT 50,000 must be placed, with a minimum
term of three months and interest paid monthly.

Cumulative Profit Scheme: A deposit of at least BDT 10,000 must be made, with interest paid at
maturity.

Double Money Deposit Scheme: A specified sum of BDT 50,000 must be placed, with the amount
being doubled after a certain period of time.

Fixed Deposit General: A set amount of at least BDT 10,000 must be deposited in a fixed deposit
with a minimum term of three months and interest paid at maturity.

Quarterly Profit Schemes: A specified amount of BDT 50,000 must be put in a scheme with a
minimum term of one year and quarterly interest payments.

Club Royal: IPDC provides privileged and priority services to their high-value customers through
Club Royal, including personal financial advising. They are one of the few non-banking financial
services companies in the country that provide their top customers this special convenience and
engagement platform. (IPDC, 2020)

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1.1.4 Philanthropic Activities/ CSR

IPDC has been involved in various CSR related activities.

Building a Generation of Enthusiastic Youth: A population of 10,000 people lives in a distant
char of Bogra called Son Pocha Chor, where they strive for a living every day. IPDC Finance and
the AMAL Foundation stepped in to help build a school for youngsters who have never had the
opportunity to attend school. Only the art of education, according to IPDC Finance, can stimulate
the joy of creative expression and knowledge for a brighter tomorrow.

Helping the Elderly: The wealthy bear responsibilities for the well-being of a country's senior
citizens. As part of its commitment, IPDC stepped up to support this huge effort to assist the elderly
with their everyday needs. Medicines, walking sticks, plastic chairs, cookware, toiletries,
commodities, food, garments, stand fans, gas cylinders, and other items were provided by IPDC
Finance to an old age home in Chandpara.

Providing Scholarships to Students: IPDC Finance assumed responsibility for the annual costs
to facilitate a smooth educational journey for a distressed student at Aga Khan School. IPDC
Finance supports the nation by ensuring that kids have access to education whenever possible.
(IPDC, 2017)

Donation for food and supplies for Covid-19 affected by Mission Save Bangladesh: With the
help of Mission Save Bangladesh, IPDC was able to help provide most of the daily essentials for
COVID-affected households on a regular basis.

Manobota Campaign for the community: During the COVID-19 pandemic, the IPDC launched
Manobota, a deposit plan to enable individuals save money and provide food for the poor.
Thousands of individuals were forced to subsist on a limited amount of food during the holy month
of Ramadan, which began in the midst of the outbreak due to a scarcity of affordable food and
other requirements. The new deposit product encouraged the wealthy to stand alongside the poor
during this time. Through the collaborative participation of both the depositor and IPDC, a needy
household was given with food for a complete month for every Tk 1 lakh deposited in a 'IPDC
Manobota' account. (IPDC, 2020)

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Donating food and supplies to people affected by Helping build school for children in a village
Covid-19

Providing Scholarships to distressed students in Aga Khan School

IPDC helping the elderly Manobota Campaign for the community

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Chapter 2

2.1 Job Responsibilities

I worked as an Intern in the operations department at the Head Office of IPDC finance Limited. I
was mainly working in 2 teams, which are custody management and OPS collections. In custody
management my main task was to scan Postdate checks (PDC), Undated checks (UDC) and Direct
Debit Instruction (DDI) forms as well as documents such as Auto loan, Home loan, Land file, etc.
These documents are also used for audit purposes. Occasionally, I was asked to upload scanned
documents to Docudex electronic database management system. All the scanned checks and
documents had to be put into folders by its name and account number before being uploaded. All
the scanned files are then accessible to employees from all the branches. In OPS collections team,
I assigned to manually write details of checks in a physical book, such as check number, name,
account number, purpose, which bank it will be handed over to etc. There were some tasks that I
performed irregularly during my internship period, sometimes I had to arrange checks by its
number and sort them accordingly, as these were asked for specific purpose. I also had to arrange
envelopes which contained checks by its product code, Branch code and or serial number. For
example, if the middle 3-digit number has 629 or 630 then it is home loan product. The first 4
digits indicates branch code while the last 3 digits is the serial number.

2.2 Functions of the department

Operations department has various teams with various functions. The custody management team
is merely responsible for scanning documents, checks and DDI forms which are later uploaded to
Docudex Electronic database management. The checks and DDI forms are handed back to OPS
collections team. The scanned documents are accessible to employees from all the branches and
concerned people so that they can do their work effectively. They are also responsible for
safekeeping documents when they are handed over to them from various departments. The OPS
collections team is responsible for collecting installment money, loan repayment or fixed amount
money in terms of checks, EFTN which is an online method through Bkash in which IPDC pulls

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money from customer’s bank and SI which means Standing Instruction where a particular amount
will be debited from one account and the same amount will be credited to another account in the
same bank at a regular interval. All the checks arrive from the business end departments such as
Retail collections, SME collections and Corporate.

Chapter 3

3.1 Industry Analysis of NBFI Sector in Bangladesh

Overview and History:

NBFIs are a good complement to banks since they provide the framework for allocating surplus
funds to individuals and businesses with deficits. Also, NBFIs introduce competition into the
financial services market. NBFIs do not offer a checkbook, current or savings account. It only
accepts fixed and time deposits. (Carmichael & Michael Pomerleano, 2002) Since the beginning,
bank financial institutions have played an important role in Bangladesh's economic and
infrastructure development. NBFIs have a shorter history than Banks, although it is prominent.
Throughout the years, NBFIs have become more and more important part of Bangladesh's financial
system. According to (Goldsmith, 1969), NBFIs, along with the banking industry, play a
significant role in influencing and generating saving for investment. According to (Sufian, 2007),
as the performance of NBFIs improves, so does the performance of the capital market. NBFIs have
played an important role in the financial sector by providing financial services that banks cannot
normally supply.

NBFIs have established themselves in the competitive financial sector by offering more diverse
products and services to meet changing customer demands. NBFIs, are financial institutions that
offer financial services, such as banking, but do not have a banking license. These institutions are
not permitted to accept public deposits. Bangladesh has seen positive growth of non-bank financial
institutions as financial intermediaries, providing a counterbalance to commercial banks. Despite
of the fact that lease finance is the primary business of most NBFIs, a small number of NBFIs
engage in other financial operations such as term lending, house financing, merchant banking,
equity financing, venture capital financing, project financing, and so on. NBFIs have also

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diversified their services to various sectors like, Leather products, agriculture, small and cottage,
textile, trading, chemical pharmaceuticals, transport, food and beverage and construction and
engineering. (Sujan Kanti Biswas & Rajib Datta, 2015)

The path of NBFIs began in 1981, ten years after the country's independence. Industrial Promotion
and Development Company (IPDC), a private sector NBFI, was the industry's pioneer in
Bangladesh. The non-banking sector has expanded in size over time as more state-owned, private,
and joint-venture enterprises have joined the sector, with a total of 35 organizations by the end of
2010. In both absolute and relative terms, the non-banking sector has grown in size. For example,
in 2000, the non-banking industry had an absolute value of BDT 78.84 billion, but by the end of
2010, it had grown to BDT414.11 billion. In contrast, the non-banking sector's relative size, as
measured by assets as a percentage of GDP, climbed to 5.96 percent in 2010 from 3.85 percent in
2000. Furthermore, the non-banking sector's relevance has grown fast as NBFIs have developed
new sectors of business operations such as leasing, term loan, housing and real estate financing,
merchant banking, factoring, and so on. (Ahmed & Chowdhury, 2007; Debnath, 2004; Hossain &
Shahiduzzaman, 2002; Nasreen & Jahan, 2007)

Bangladesh Bank regulates and supervises NBFIs through two departments: Department of
Financial Institutions and Markets and Financial Institutions Inspection Department. NBFIs also
play a significant role in Bangladesh's capital market and also in real estate sector. Most NBFIs,
like banks, have separate subsidiaries to run merchant banking operations. Bangladesh now has 35
non-banking financial institutions (NBFIs) (also including Peoples Leasing & Financial Services
Limited, which is under insolvency). In the year 2020, Bangladesh Bank has granted a license to
a new financial organization called 'Strategic Finance and Investment Limited.

Regulations and Licenses: The Financial Institution Act of 1993 gives Bangladesh Bank the
jurisdiction to provide licenses to NBFIs, as well as regulate and control them. Financial Institution
Regulation 1994 was issued with the government's permission under the Act. In addition, BB has
published prudential norms and guidance for NBFIs under section 18 (Chha) of the FI Act 1993.
The minimum paid up capital required for an operating FI is BDT 1.0 billion, according to Circular
No. 5 dated July 24, 2011. However, paid-up capital and reserves must meet the Bangladesh Bank's
risk-weighted asset ratio minimum. NBFIs can obtain public money directly or indirectly through
term deposits (minimum 3 months duration), commercial papers (CPs), bonds, and debentures,

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according to the License and Regulations. NBFI depositors are not covered by the Bangladesh
Bank's Deposit Insurance Scheme. NBFIs are prohibited from dealing in gold or foreign exchange.
They may, however, receive a foreign currency loan from another country with the Bangladesh
Bank's prior clearance. (Bangladesh Bank, 2020)

Performance & Growth:

Assets: NBFI assets totaled BDT 860.33 billion at the end of June 2020, compared to BDT 871.50
Billion compare to end of 2019. The total asset accounted at BDT 436.3 billion in 2013. Which
was 7 years ago.

Equity and Other Liabilities: The industry's total liability climbed to BDT 753.12 billion in
December 2019 from BDT 739.69 billion in December 2018. At the end of June 2020, Total
liability and equity remained at BDT 768.71 billion and BDT 91.62 billion, respectively.

Profitability: A Financial institution’s earnings and profitability reflect its resource management
efficiency and long-term viability. In June 2020, the ROA and ROE of all NBFIs were 0.24 and
2.21 correspondingly. While the ROA and ROE in 2012 was 1.9% and 10.4% respectively. This
shows that the earnings have been declining in past 8 years of the NBFI sector.

Figure 3. 3 Trends in Assets, Liabilities & Deposits of NBFIs Figure 3. 2 Trends in Profitability of NBFIs

Source: DFIM, Bangladesh Bank Source: DFIM, Bangladesh Bank

Asset Quality: The ratio of nonperforming loans to total loans is a measurement of asset quality.
The ratio of gross non-performing loans and leases to total loans and leases is known as the non-
performing loan/lease ratio. At the end of June 2020, NBFIs' NPL was 13.29 percent. During

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period of sale, loans, leases, and advances accounted for 77.82 percent of all NBFIs' total asset
composition.

Investment: NBFIs invest in a variety of economic sectors, however their investments are
primarily centered on the industrial sector. At the end of June 2020, the following were the sectors
in which NBFIs had invested: Industry accounts for 46.45% of the total, real estate for 19.41%,
margin loans for 2.22 percent, trade and commerce for 13.84 percent, merchant banking for 3.34
percent, agricultural for 2.30 percent, and others for 12.44 percent.

(Bangladesh Bank, 2020)

Figure 3. 5 Trends in NBFIs' Total, Figure 3. 4 Investment Pattern

Classified Loan/Leases and their ratios of NBFIs as of 30 June 2020

Source: DFIM, Bangladesh Bank Source: DFIM, Bangladesh Bank

Deposits

Total NBFI deposits decreased by 3.07 percent to BDT 451.93 billion (60.00 percent of total
liabilities) at the end of December 2019 from BDT 466.26 billion (63.03 percent of total liabilities)
at the end of 2018. At the end of June 2020, the total deposit of NBFIs was BDT 441.17 billion.

Capital Adequacy
Under the Basel III Accord, NBFIs in Bangladesh are required to maintain a Capital Adequacy
Ratio (CAR) of not less than 10.0 percent, with at least 5.0 percent in core capital.

Bond and Securitization Activity

Through the issuance of various types of bonds, NBFIs play a significant role in the growth of the
bond market. Eleven bond instruments having a nominal value of BDT were issued with the

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approval of the BB's Department of Financial Institutions and Markets (DFIM). Up till June 2020,
a total of 23.50 billion has been floated in the market.

Measures to Reduce the Impact of Covid-19 on Financial Institutions:

The COVID-19 pandemic has created uncertainty in Bangladesh's financial and commercial
sectors, as it has elsewhere throughout the world. The Bangladesh Bank has implemented a number
of policies to alleviate the effects of COVID-19 on financial institutions and their customers. Some
of these policies include: maintaining loan/lease/advance classification status from January to
September 2020, lowering the Cash Reserve Requirement (CRR) from 2.5 percent to 1.5 percent
bi-weekly and from 2.0 percent to 1.0 percent daily, and restructuring and revolving loan renewal
facilities on simple terms and conditions.

(Bangladesh Bank, 2020)

3.2 Main competitor

The main objective of this report is to evaluate the performance of Non- Bank financial institutions
in Bangladesh before and after the Covid-19 pandemic. The data for this report has mainly been
collected from the annual reports of the companies.

The Non-Bank Financial institutions were chosen based on Market capitalization of IPDC finance
and its competitors. The companies that have a market cap between 10 billion and 200 billion are
in the Large-Cap category. The following are the non-bank financial that belong in the large-Cap
category:

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 Figure 3. 6 Market Capitalization of NBFIs

Non-Bank Financial Institution Market Capitalization (BDT) in Billion

IPDC Finance 10.8

IDLC Finance 23.71

LankaBangla Finance 19.34

Delta Brac Housing Finance Corporation 13.53

Source: Annual Reports of the Companies

3.3 Ratio Analysis

A number of ratios were used to analyze the data in order to gain insight of the financial and
operational performance of Non-bank financial institutions before and after the Covid-19
pandemic. To measure the profitability of the companies, Return on Assets and Net Interest Margin
is used. In order to evaluate company’s ability to generate return for investors, Earnings per share
and P/E Ratio were used. Current ratio and Loan to Deposit ratio were used to measure the liquidity
of the firms. Efficiency ratio was used to measure the companies’ ability to utilize its assets to
make profit. In order to measure solvency of the firms, Capital Adequacy ratio was used. Non-
performing loan ratio has been used to evaluate the credit risk and Asset quality of outstanding
loans.

3.3.1 Return on Assets (ROA)

Return on assets is a measure of a company's profitability in relation to its total assets. The return
on assets tells a manager, investor, or a financial analyst how well a company's management is
utilizing its assets to generate profits. (Marshall Hargrave, 2021)

Formula = Net Income/Total Asset

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 Figure 3. 7 Return on Assets Comparison Graph

ROA (%)
2.50

2.00

1.50

1.00

0.50

0.00
2016 2017 2018 2019 2020

IPDC Finance IDLC Finance

LankaBangla Finance Delta Brac Housing Finance Corporation

Source: Annual Reports of the Companies

Analysis:

Before the pandemic, IPDC is having gradual decrease and low ROA, While IDLC had a declining
ROA throughout the period. LankaBangla is seen to have a decreasing return on assets while DBH
has kept its ROA stable throughout the years.

Figure 3. 8 Average Return on Assets Comparison Graph

ROA (%)
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
IPDC Finance IDLC Finance LankaBangla Finance Delta Brac Housing
Finance Corporation

2016-19 Average 2020

Source: Annual Reports of the Companies

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On an average, IDLC had the highest return on assets of 1.79%, which indicates that the company
is utilizing its assets efficiently to generate profits. IPDC has the lowest return on assets of 0.99%.

Impact of covid-19: In 2020, IPDC and LankaBangla return on assets had slightly decreased.
IDLC had an increase in ROA by 0.16% while DBH managed to keep it stable. IDLC and DBH
remained unaffected by the pandemic in terms of ROA. IDLC had the highest ROA of 1.79%
while IPDC had the lowest of 0.93% in 2020.

3.3.2 Loan to Deposit Ratio

By evaluating a bank's total loans to its total deposits for the same timeframe, the loan-to-deposit
ratio (LDR) is used to measure a bank's liquidity. The LDR is measured in percentages. If the ratio
is excessively high, the bank may not have enough liquidity to fulfill any unexpected funding
needs. If the ratio is very low, the bank may not be making as much money as it could. The ideal
loan-to-deposit ratio is usually between 80 and 90 percent. A bank with a loan-to-deposit ratio of
100 percent means, it lent one taka to customers for every taka it received in deposits. (Chris B.
Murphy, 2020)

Formula = Total Loans/Total Deposit

Figure 3. 9 Loan to Deposit Ratio Comparison Graph

Loan to Deposit (% )
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
2016 2017 2018 2019 2020

IPDC Finance IDLC Finance

LankaBangla Finance Delta Brac Housing Finance Corporation

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 Source: Annual Reports of the Companies

Analysis:

From 2016-2019, Loan to Deposit ratio of IDLC, IPDC and DBH has been decreasing steadily,
whereas LDR of LankaBangla has been increasing.

Figure 3. 10 Average Loan to Deposit Ratio Comparison Graph

Loan to Deposit (% )
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
IPDC Finance IDLC Finance LankaBangla Finance Delta Brac Housing
Finance Corporation

2016-2019 Average 2020

Source: Annual Reports of the Companies

On an average, Lank Bangla Finance has the highest LDR of 121.25%. This indicates that the
company may not have enough liquidity to fulfil needs of unexpected funding or cover loans in
case of loan defaults. DBH has the lowest LDR of 102.64% which is still not within the ideal
percentage but lower compared to its competitors.

Impact of covid-19: In 2020, DBH had the lowest LDR of 97.54% and LankaBangla had the
highest of 114.91. IPDC had a decrease in LDR by 12.37%, whereas LankaBangla had its LDR
decline by 6.34%. According to this trend, the non-banks are issuing less loans compared to its

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deposits to avoid risk of more loan defaults that is likely to happen more in 2020 because of the
pandemic.

3.3.3 Current Ratio

The current ratio is a liquidity ratio that assesses a company's capacity to pay short-term or one-
year obligations. It explains to investors how a firm might use current assets on its balance sheet
to pay off current debt and other obligations. A ratio of less than 1.0 shows that the company's
debts due in a year or less exceed its assets, which are cash or other short-term assets that will be
converted to cash in a year or less. (Jason Fernando, 2021)

Formula = current assets/current liabilities

Figure 3. 11 Current Ratio Comparison Graph

Current Ratio (times)

1.20

1.15

1.10

1.05

1.00

0.95

0.90
2016 2017 2018 2019 2020

IPDC Finance IDLC Finance

LankaBangla Finance Delta Brac Housing Finance Corporation

Source: Annual Reports of the Companies

Analysis:

From 2016-2019, The current ratio of IPDC and DBH has been rising steadily, while current ratio
of IDLC and LankaBangla has been decreasing gradually. All the Non-banks were able to maintain
a current ratio of 1 or above.
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 Figure 3. 12 Average Current Ratio Comparison Graph

Current Ratio (times)

1.20

1.15

1.10

1.05

1.00
0.95

0.90
IPDC Finance IDLC Finance LankaBangla Delta Brac Housing
Finance Finance Corporation

2016-2019 Average 2020

Source: Annual Reports of the Companies

On an Average, IDLC has the highest current ratio of 1.13, while IPDC has the lowest of 1.02.
Even though IPDC has an average ratio above 1, its competitors have a higher current ratio
indicating that they have more sufficient liquidity to meet their short-term obligations in
comparison.

Impact of Covid-19:

The current ratio of all the NBFIs increased slightly in 2020, as the companies are trying to
maintain a higher current ratio so they have adequate liquidity for short term debt or any
unexpected funding needs.

3.3.4 Net Interest Margin

The net interest margin (NIM) is a metric that compares a financial firm's net interest income from
credit products like loans and mortgages to the interest it pays on savings accounts and certificates
of deposit (CDs). The NIM is a profitability indicator expressed as a percentage that estimates the
chance of a bank or financial institution surviving over time. This indicator gives insights into the

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profitability of a financial services firm's interest income vs interest expenses, which aids
prospective investors in deciding whether or not to invest. (Andrew Bloomenthal, 2021)

Formula = Net Interest Income/Average Earning Assets

Figure 3. 13 Net Interest Margin Comparison Graph

Net Interest Margin (%)

4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2016 2017 2018 2019 2020

IPDC Finance IDLC Finance

LankaBangla Finance Delta Brac Housing Finance Corporation

Source: Annual Reports of the Companies

Analysis:

Before the pandemic, IPDC and LankaBangla is having a low and fluctuating NIM, While DBH
is showing a steady increase in NIM over the years. IDLC had a gradual decrease in NIM over the
years.

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 Figure 3. 14Average Net Interest Margin Comparison Graph

Net Interest Margin (%)

4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
IPDC Finance IDLC Finance LankaBangla Finance Delta Brac Housing
Finance Corporation

2016-2019 Average 2020

Source: Annual Reports of the Companies

Based on the average NIM of 2016-2019, IDLC has the highest NIM of 3.59%, while DBH has
the lowest of 2.43%. IDLC’s higher NIM indicates that they are efficiently utilizing their earning
assets which are their outstanding loans and leases.

Impact of Covid-19:

IDLC and LankaBangla had a decline in NIM compared to IPDC in 2020. While NIM of DBH
increased by 0.57%. Due to the pandemic, there might have been more loan defaults which resulted
in lower net interest income earned by the non-bank financial institutions.

3.3.5 Earnings per share

The net profit after tax of a firm is divided by the number of outstanding shares of its common
stock is used compute earnings per share (EPS). The resulting figure is used to determine a
company's profitability. EPS is a widely used indicator for measuring corporate value since it
shows how much money a company makes for each share of its stock. Investors will pay more for
a company's stock if they believe the company's profits are higher compared to its share price, so
a higher EPS signals more value. (Jason Fernando, 2021)

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Formula = Net Income – Proffered dividends/Common shares Outstanding

Figure 3. 15 Earnings Per Share Comparison Graph

EPS (BDT/share)
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2016 2017 2018 2019 2020

IPDC Finance IDLC Finance

LankaBangla Finance Delta Brac Housing Finance Corporation

Source: Annual Reports of the Companies

Analysis:

From 2016-2019, IPDC is having a low and stable EPS. IDLC is showing to have a high yet
declining pattern of EPS. LankaBangla is having a high EPS for the first 2 years and then it started
declining significantly after that. Lastly, DBH has had a high and fluctuating EPS over the time
frame.

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 Figure 3. 16 Average Earnings Per Share Comparison Graph

EPS (BDT/share)
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
IPDC Finance IDLC Finance LankaBangla Finance Delta Brac Housing
Finance Corporation

2016-2019 Average 2020

Source: Annual Reports of the Companies

Based on the average EPS of 2016-2019, DBH has the highest EPS of 6.7, whereas IPDC has the
lowest of 1.87. DBH’s high EPS suggests that their profits are higher relative to its share. Their
higher EPS growth over the years can be attractive to potential investors. Although EPS is based
on share count it is difficult to tell which company is making more profit just based on this figure.

Impact of Covid-19:

In 2020, LankaBangla and DBH had a decline in EPS significantly, whereas EPS of IPDC was
slightly higher compared to its previous years. EPS of IDLC is 5.85, which is higher compared to
its previous years.

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3.3.6 Price-to-earnings ratio

The price-to-earnings ratio (P/E ratio) is a valuation ratio that compares a company's current share
price to its EPS. A high P/E ratio could indicate that a company's share is overvalued, or that
investors anticipate strong future growth rates. Investors and analysts use P/E ratios to estimate
the relative value of a company's stock in a proper comparison. (Jason Fernando,2020)

Figure 3. 17 Price to Earnings Ratio Comparison Graph

P/E Ratio (times)

30.00

25.00

20.00

15.00

10.00

5.00

0.00
2016 2017 2018 2019 2020

IPDC Finance IDLC Finance

LankaBangla Finance Delta Brac Housing Finance Corporation

Source: Annual Reports of the Companies

Analysis:

In the years 2016-2019, IPDC and IDLC is having a high and unstable p/e ratio. LankaBangla is
showing a growing p/e ratio from 2016, until 2019 when it fell to 12.55. finally, DBH is showing
declining trend in EPS over the years.

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 Figure 3. 18 Average Price to Earnings Ratio Comparison Graph

P/E Ratio (times)

25.00

20.00

15.00

10.00

5.00

0.00
IPDC Finance IDLC Finance LankaBangla Finance Delta Brac Housing
Finance Corporation

2016-2019 Average 2020

Source: Annual Reports of the Companies

Based on the average p/e ratio of 2016-2019, IPDC has the highest of 20.78, whereas LankaBangla
has the lowest of 12.31. IPDC’s p/e ratio suggests that it is overvalued and it might be attractive
to investors as they anticipate strong future growth rates. The stock of LankaBangla is undervalued
compared to others.

Impact of Covid-19:

In 2020, p/e ratio of IPDC and IDLC fell significantly compared to DBH. While, the p/e ratio of
LankaBangla increased by 8.17 to 20.48, making it overvalued compared to others in 2020. So
IPDC, IDLC and DBH were more affected by the pandemic compared to LankaBangla in terms of
p/e ratio.

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3.3.7 Efficiency Ratio

Efficiency ratio for banks demonstrates how well the bank's managers manage their overhead (or
"back office") costs. Analysts can use this ratio to evaluate the performance of commercial and
investment banks. A lower efficiency ratio indicates that a bank is running more efficiently. A 50
percent or lower efficiency ratio is deemed ideal. When the efficiency ratio rises, it indicates that
a bank's expenses are rising or its revenues are falling. (Adam Hayes, 2020)

Formula = Non-Interest Expense/Revenue

Figure 3. 19 Efficiency Ratio Comparison Graph

Efficiency Ratio (%)

80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2016 2017 2018 2019 2020

IPDC Finance IDLC Finance

LankaBangla Finance Delta Brac Housing Finance Corporation

Source: Annual Reports of the Companies

Analysis:

In the years 2016-2019, IPDC and IDLC is having a gradual increase in efficiency ratio throughout
the years. The efficiency ratio of LankaBangla was stable in the first 2 years but significantly
increased the following year and has been steady since then. Lastly, DBH is having steady
efficiency ratio over the years.

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 Figure 3. 20Average Efficiency Ratio Comparison Graph

Efficiency Ratio (%)

70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
IPDC Finance IDLC Finance LankaBangla Finance Delta Brac Housing
Finance Corporation

2016-2019 Average 2020

Source: Annual Reports of the Companies

On an Average, LankaBangla has the highest efficiency ratio of 61%, indicating that they are not
managing their non-interest expenses very well. Therefore, their expenses are rising or revenue is
falling. DBH has the lowest ratio of 25.99%, which is even lower than the ideal ratio of 50%. It
indicates that the company is operating efficiently in terms of their non-interest expenses and
revenue.

Impact of Covid-19:

In 2020, LankaBangla had a small increase in efficiency ratio while IDLC’s ratio declined slightly.
IPDC and DBH barely had any impact on its efficiency ratio. It appears that, Non-banks were not
that affected by the pandemic in terms of efficiency. They were able to manage their Non-Interest
expenses efficiently.

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3.3.8 Capital Adequacy Ratio

The capital adequacy ratio (CAR) is a calculation that compares a bank's available capital to its
risk-weighted credit exposures. CAR is essential for banks to have adequate cushion to sustain a
decent level of losses before going bankrupt. Regulators use CAR to measure a bank's capital
adequacy and conduct stress testing. (Margaret James, 2020)

Formula = Tier 1 Capital + Tier 2 Capital/ Risk Weighted Assets

Figure 3. 21 Capital Adequacy Ratio Comparison Graph

Capital Adequacy Ratio (%)

30.00

25.00

20.00

15.00

10.00

5.00

0.00
2016 2017 2018 2019 2020

IPDC Finance IDLC Finance

LankaBangla Finance Delta Brac Housing Finance Corporation

Source: Annual Reports of the Companies

Analysis:

Before the pandemic IPDC had the highest CAR compared to its competitors although it had been
inconsistent through the time frame. LankaBangla is having a gradual increase in CAR over the
years. DBH has had a gradual increase in CAR over the years.

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 Figure 3. 22 Average Capital Adequacy Ratio Comparison Graph

Capital Adequacy Ratio (%)

30.00

25.00

20.00

15.00

10.00

5.00

0.00
IPDC Finance IDLC Finance LankaBangla Finance Delta Brac Housing
Finance Corporation

2016-2019 Average 2020

Source: Annual Reports of the Companies

Based on the average ratio of years 2016-2019, DBH has the highest CAR ratio of 18.44%, while
LankaBangla has the lowest of 14.29$. The high CAR ratio of DBH indicates that they are
considered safe and likely to meet their financial obligations. The minimum capital adequacy set
by the central bank of Bangladesh is 10%. IPDC and all its competitors have a capital adequacy
ratio above 10%. All the non-banks have enough capital to absorb loses in case the go bankrupt
and therefore lose depositors’ funds.

Impact of Covid-19: All of IPDC and its competitors have a higher CAR ratio in 2020 compared
to its average ratio over the last 4 years. They are ensuring that they have enough cushion to protect
the depositor’s asset.

3.3.9 Non-performing Loan Ratio

A nonperforming loan (NPL) is a loan that is in default because the borrower has failed to make
scheduled payments or interest for a set period of time. If a borrower is 90 days past due on a
commercial loan, it is deemed nonperforming in banking. (Amy Drury, 2021)

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Formula = Non-performing loans/ Total Outstanding Loans

Figure 3. 23 Non-performing Loan Ratio Comparison Graph

NPL Ratio (%)

6.00

5.00

4.00

3.00

2.00

1.00

0.00
2016 2017 2018 2019 2020

IPDC Finance IDLC Finance

LankaBangla Finance Delta Brac Housing Finance Corporation

Source: Annual Reports of the Companies

Analysis:

IDLC and IPDC is having fluctuations patterns in their NPL over the years. NPL of LankaBangla
has been quite stable over the years, while it rose all the way to 5.59% in 2019 from 3.6% from
the previous year. DBH is having a gradual increase in NPL over the time frame.

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 Figure 3. 24 Average Non-performing Loan Ratio Comparison Graph

NPL Ratio (%)

5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
IPDC Finance IDLC Finance LankaBangla Finance Delta Brac Housing
Finance Corporation

2016-2019 Average 2020

Source: Annual Reports of the Companies

Based on the average ratio of years 2016-2019, LankaBangla has the highest NPL ratio of 3.95%
while DBH has the lowest of 0.35%.

Bangla’s high ratio indicates the more defaults compared their total loans and the borrowers have
failed to make scheduled payments or interest for a set period of time. Whereas the DBH has less
defaults making their Asset quality better than their competitors.

Impact of Covid-19: In 2020, LankaBangla and DBH’s nonperforming loans had went up, which
can be caused by the pandemic as clients are unable to pay for their loans. As businesses are
declining in revenue and people are losing their jobs. Although, IPDC and IDLC seems to be
unaffected by the pandemic as their nonperforming loans had fallen in 2020.

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3.4 Recommendation and Implications

In the analysis of ratios, we can see several trends when some non-banks are doing good, some
fluctuating patterns and some companies falling behind their competitors. In terms of efficiency,
LankaBangla should focus on minimizing their Non-interest expenses in order for their company
to run more efficiency, as their efficient ratio is the highest among its competitors. Companies
such as IDLC and LankaBangla should improve their asset quality by doing a proper evaluation
of the creditworthiness of a client. They should do a proper credit check before loans are being
sanctioned because their non-performing loans are higher compared to IPDC and DBH. A proper
evaluation of the following 5cs of credit should be done before loan is approved: Applicant's credit
history, the applicant's debt-to-income ratio, the amount of money an applicant has, collateral:
which is an asset that can back or act as security for the loan, lastly the conditions: the purpose of
the loan, the amount involved, and prevailing interest rates. All the non-banks had loan to deposit
ratio greater than 90%, indicating they may not have enough liquidity to fulfill any unexpected
funding needs. To improve their liquidity, they should not lend more in loans money compared to
the money it receives as deposits. LankaBangla and IPDC both had a lower ROA and EPS
compared to their competitors. They should utilize their Assets more efficiently to gain more
profits or they can improve their margin by lowering costs. IPDC has the lowest current ratio,
therefore they should improve their liquidity by delaying any capital purchases that would involve
cash payments, checking whether any term loans can be re-amortized, any capital assets that are
not making a profit for the company should be sold. Also, current liabilities should be paid off as
often and as early as possible.

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Chapter 4

4.1 Conclusion

IPDC Finance has always been seeking for new methods to innovate and fulfill the needs of 21st-
century customers. They assisted new firms with their initial capital investment, modernization of
production facilities, leasing facilities for the acquisition of fixed assets, and other kinds of
financing. Despite the pandemic, IPDC was able to keep its Net interest margin, Return on Assets
and Earnings per share stable in 2020. They had the second highest capital adequacy ratio, ensuring
that they have enough cushion to protect the depositor’s asset. They had second lowest Non-
performing Loan’s ratio, making their asset quality competitive, as they had less loan defaults.
IPDC can still improve in many aspects that its competitors are better at, such utilizing its assets
efficiently to generate higher profits and maintaining a higher current ratio to have adequate
liquidity for short term debt or any unexpected funding needs. In 2020, The economy was severely
affected by the pandemic, most of the non-banks had a lower Return on Assets, Net Interest Margin
and Earnings per share compared to its previous year’s average. Their asset quality fell as they had
a higher Non-performing loan in 2020. Most non-banks had consistent a current ratio and a higher
capital adequacy ratio. In conclusion, Non-banks were mainly affected in terms of their
profitability and asset quality.

As an Intern in IPDC Finance Limited, it has been a great learning experience for me as this was
the first time I’ve ever worked in a corporate workplace. Getting used to the workplace
environment was challenging yet a pleasant experience. The employees there were very helpful
and guided me throughout the internship. I was able to relate theory to practice, work under
pressure and improve my interpersonal skills. I am confident that this internship program will
definitely help me shape my career in the future.

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