33 OVERVIEW OF THE CITY BANK LTD. Organizational set-up Bank is a service-oriented organization. With the wide networking and geographical area coverage it emphasizes on its improved services for existence and prosperity. Private sector commercial banks are private companies operated under the legislative framework, which covers both company Act, and Banking Company Act. Like all business entities, bank's main objective is also profitability and solvency. However, besides the primary objective of profit making, banks also have social responsibilities. A brief overview of The City Bank Ltd.’s organizational set-up is enumerated in subsequent paragraphs. Historical Background Privatization of Banking is an outcome of the deliberate policy change by the government of Bangladesh in the late 1970. The emergence of The City Bank Ltd. at the juncture of liberalization of global economic activities, after the URUGUAY ROUND has been
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OVERVIEW OF THE CITY BANK LTD.
Organizational set-up
Bank is a service-oriented organization. With the wide networking and geographical area
coverage it emphasizes on its improved services for existence and prosperity. Private sector
commercial banks are private companies operated under the legislative framework, which covers
both company Act, and Banking Company Act. Like all business entities, bank's main objective
is also profitability and solvency. However, besides the primary objective of profit making,
banks also have social responsibilities. A brief overview of The City Bank Ltd.’s organizational
set-up is enumerated in subsequent paragraphs.
Historical Background
Privatization of Banking is an outcome of the deliberate policy change by the government of
Bangladesh in the late 1970. The emergence of The City Bank Ltd. at the juncture of
liberalization of global economic activities, after the URUGUAY ROUND has been an
important event in the financial sector of Bangladesh. The experience of the prosperous
economies of Asian Countries and in particular of South Asia has been the driving force and the
strategic operational policy option of the Bank. The company philosophy- "A Bank with fastest-
service " has been precisely the essence of the legend of Asian Success.
The Government of Bangladesh has The City Bank Ltd., as a scheduled bank in the private
sector is pursuance of the policy of liberalization of banking and financial services in
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Bangladesh. The bank was incorporated as a public limited company on 14 th March 1983 under
Companies Act 1913 and commenced banking operations through the Principal Branch at 10,
Dilkusha Commercial Area, Dhaka on 27th March 1983. The bank (head office) was inaugurated
by the honorable President of the country Mr. Hussain Mohammad Ershad. Mr. Deen
Mohammad was elected as the first Chairman of the board in the bank.
Organizational Structure of City Bank:
Organizational Structure
“It is the formal arrangement of jobs within an organization” developing an organization
structure manager go through the process called organizational design, that involves decision
about six key elements i.e. Work specialization, departmentalization and formalization etc. Now
we analyze the Citibank’s organizational structure according to these factors.
Work Specialization:
As work specialization is used to describe the degree to which activities is organization are
divided into separate jobs. This means that an entire task is not done by one individual but
instead is broken down into jobs by different persons. In Citibank task are divided into different
jobs according to the requirements and work specialization can be seen e.g. in the dealing of
debit cards a single person is not involved in the process. There is a CRM (customer relation
manager) and a CRO (customer relation officer) while CRM deals with validation of debit cards
and CRO deals with the transaction relating debit cards.
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Departmentalization:
The basis by which jobs are grouped together is called departmentalization.
In case of Citibank you can see two major forms of departmentalization i.e. functional and
geographical departmentalization. First of all they have divided into departments according to
the functions i.e. dealing with cash, banking operation, sales and receive that they provide for
each of the above categories there is a separate department as can be seen in organizational
charts .then for the completion of these functions. They never further classified these
departments. According to the geographical departmentalization. For that purpose there are
regional as well as are managers. This shows that Citibank is highly departmentalized
organization however the two type’s i.e. product and process departmentalization is not present.
In Citibank cross functional teams are not made departments works on their own.
Board of Directors and Management:
The sponsor directors of the bank are successful group of prominent local and non-
resident of Bangladesh investors who have earned high credentials and excellent
reputation in their respective fields of business at home and abroad. The board of
directors of the bank consists of 23 members. Mr. Aziz Al Kaiser a noted industrialist is
the present chairman of the bank. Presently, a team of experienced professionals headed
by the MD and CEO manages the bank. Span at the top-level management is fairly
narrow and MD has a DMD to look after all the operations of the bank. Thus MD's
effective control is possible.
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Human Resources:
Since customer's perception about the bank's service offerings is highly dependent on
performance of personnel, commercial banking is a service where customers play a vital
role in both fund generation and fund utilization. So, presence of a well-trained
professional set of personnel is very crucial for all commercial banks. The City Bank Ltd.
has well educated skilled and enterprising work force with wide experience in banking.
To achieve The City Bank Ltd.'s objective, management always emphasizes on
employing people with pleasing personality and academic background.
Since its inception, The City Bank Ltd. practiced officer based banking. This means that
the officers of different type basically perform all the banking functions of the branches.
As officers come in contact with clients, better service can be provided. Thus, The City
Bank Ltd.'s image building campaign has been moved effectively. At the same time the
malpractice of trade unionism could be avoided.
Categorization of officers:
1. Executive : AVP to MD
2. Officer : Trainee Assistant Officer to Staff Officer
The Authorized Capital of the bank remained unchanged a Tk. 400.00 million in the year
ended 2007. Though the Authorized Capital remained unchanged the Paid-up Capital have
increased to Tk.240.00 million from Tk.160.00 million through issuing rights share at par 1:2
(one right share against two ordinary share) in the year ended 2007. As against Tk. 263.10
million in 2006 Reserve Fund of the Bank stands at Tk.543.80 million at the end of the year
2007. The growth under this head is 107%. The capital base of the Bank strengthened as a result
of augmentation of Authorized Capital and Reserve Fund. The Government of Bangladesh holds
32,940 shares of this bank of which 1, shares have been transferred to the general public through
Investment Corporation of Bangladesh (ICB) and the rest of the shares are under process of
transfer to the general public.
PROPERTY AND ASSETS NOTE 2008 T.K 2007 T.KCash In hand (including foreign currencies) Balance with Bangladesh Bank and its agent bank (s) (including foreign currencies)
3704,619,630
2,415,553,674
771,568,562
2,705,998,489
3,120,173,304 3,477,567,051Balance with other banks and financial institutionsIn Bangladesh Outside Bangladesh
44,474,521,554
99,168,7554,672,945,417
109,529,003
4,573,690,309 4,782,474,420Money at call and short notice 5 220,000,000 1,830,000,000Investments Government Others
67,608,214,2301,423,484,654
7,094,714,100455,892,392
9,031,698,884 7,550,606,492
Balance Sheet as at 31 December 2008
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Loans and advances / Investments Loans, cash credits, overdrafts, etc./ general investments Bills purchased and discounted
732,426,746,1441,994,198,836
25,039,792,7081,748,673,430
Fixed assets including premises, furniture and fixtures 9 2,514,383,969 1,390,732,198Other assets 10 2,935,556,719 2,935,556,719Non - banking assets - -------------- ------------------Total assets 57,114,576,058 48,755,403,018LIABILITIES AND CAPITALLiabilitiesBorrowings from other banks, financial institutions and agents
11 2,104,480,285 850,000,000Deposits and other accounts Current deposits and other accounts Bills payable Savings bank deposits Fixed deposits Bearer certificate of deposit
Paid up capital Statutory reserve Other reserve Surplus in profit and loss account / Retained earnings Proposed dividend (stock)
14.2151617
1,366,200,0001,099,775,0651,518,103,447
28,468,017204,930,000
1,188,000,000896,948,006573,104,08838,114,892
178,200,000
Total Shareholders' equity 4,217,476,529 2,874,366,986Total liabilities and Shareholders' equity 57,114,576,058
===========48,755,403,018
============
OFF- BALANCE SHEET ITEMS NOTE
2008 T.K 2007 T.K
Contingent liabilities Acceptances and endorsements Letters of guarantee Irrevocable letters of credit Bills for collection Other contingent liabilities
Other commitmentsDocumentary credits and short term trade -related transactions ------------ ----------
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Forward assets purchased and forward deposits placed Undrawn note issuance and revolving underwriting facilities Undrawn formal standby facilities , credit lines and other commitments Other commitments
------------------------------------------------
----------------------------------------
Total ----------- ----------Total Off-Balance Sheet items including contingent
liabilities10,920,866,666===========
8,277,635,754=========
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PARTICULARS NOTE 2008 T.K 2007 T.K
Interest income / profit on investments
Interest / profit paid on deposits and borrowings, etc.
20
21
4,669,370,374 4,
(3,162,885,370)
183,260,712
(3,235,362,655)
Net interest / net profit on investments 1,506,485,004 947,898,057
Investment income Commission, exchange and brokerage Other operating income
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23
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1,171,667,761
493,021,
339,093,067
860,400,285
105 532,246,444
231,647,934
Total operating income (A) 3,510,266,937 2,572,192,720
Salaries and allowances
Rent, taxes, insurance, electricity, etc
Legal expenses
Postage, stamp, telecommunication, etc.
Stationery, printing, advertisements, etc.
Chief Executive's salaries and fees
Directors' fees
Auditors' fees
Depreciation and repair of Bank's assets
Other expenses
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26
27
28
29
30
31
32
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1,029,038,516
164,711,221
11,084,368
22,988,304
90,353,731
10,380,000
700,000
469,750
169,153,557
256,466,897
877,594,990
141,269,481
9,882,321
25,868,331
52,143,307
5,370,000
892,000
729,375
115,733,404
86,832,367
Profit and Loss Account for the year ended 31 December 2008
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Total operating expenses (B) 1,755,346,344 1,316,315,576
Profit / (loss) before provision (C=A-B) 1,754,920,593 1,255,877,144
Provision for loans and advances / investments Provision for Off-Balance Sheet exposures Provision for gratuity
Provision for diminution in value of investments
Other provision
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(548,925,007)
(64,208,667)
(106,544,372)
-
(21,107,250)
(297,100,000)
(45,000,000)
(50,000,000)
(10,108,000)
(45,206,118)
Total provision (D) (740,785,296) (447,414,118)
Total profit / (loss) before taxes (C-D) 1,014,135,297 808,463,026
Income Tax (616,025,113) (465,000,000)
Previous year’s tax
Deferred tax
Current Tax
13.6.2
13.6
-
23,974,887
(640,000,000)
(290,000,000)
(50,000,000)
(125,000,000)
Net profit after taxation 398,110,184 343,463,026
Retained earnings brought forward from previous year
38,114,892 34,544,471
436,225,076 378,007,497
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Appropriations Notes 2008 T.K 2007 T.K
Statutory reserve
Proposed dividend (stock)
202,827,059
204,930,000
161,692,605
178,200,000
407,757,059 339,892,605
Retained surplus 17 28,468,017 38,114,892
Earnings per share (EPS) 40 29.14 25.14
HIGH LIGHTS OF CAPITAL STRUCTURE
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Sl no. Particulars 2008 2007
1. Paid-up capital 1,366.20 1,188.00
2. Total capital 3,953.47 3,156.25
3. Capital surplus / (deficit) 361.58 652.55
4. Total assets 57,114.58 48,755.40
5. Total deposits 45,034.33 40,539.63
6. Total loans and advances / investments 34,420.94 26,788.47
7. Total contingent liabilities and commitments 10,920.87 8,277.64
8. Credit deposit ratio 76.43% 66.08%
9. Percentage of classified loans / investments againsttotal loans and advances / investments
6.30% 6.24%
10. Profit after tax and provision 398.11 343.46
11. Amount of classified loans / investments during current year
2,169.81 1,671.83
12. Provisions kept against classified loans / investments
779.80 462.78
13. Provision surplus/(deficit) against classified loans / investments
0.07 40.00
14. Cost of fund 6.90% 7.55%
15. Interest earning assets 49,196.70 42,757.28
16. Non-interest earning assets 7,917.88 5,998.12
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17. Return on investment (ROI 14.13% 12.33%
18. Return on assets (ROA) 0.75% 0.71%
19. Income from investment 1,171.67 860.27
20. Earnings per share (Taka) 29.14 25.14
21. Net income per share (Taka) 29.14 25.14
22. Price earnings ratio (times) 15.49 28.85
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FUNCTION OF ORGANIZATION:
Products / Services of the Bank:
The products / services of The City Bank Ltd. are backed by a moderate level of
computerization. The Bank is presently using Local Area Network (LAN) for banking
operation, which is capable of generating daily-consolidated statement of affairs of all the
branches.
The main products and services of the bank are illustrated following:
Deposit
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The category of services includes:
1. Current Deposits:i) Current Accountii) Foreign Currency Account.iii) Sundry Deposits.iv) Bank Deposit.
2. Saving Deposits:i) Bearer certificate of deposit.Note: Bearer certificates of deposit are not issued since October 2002 as per Order of Bangladesh Bank.
3. Term Deposits:i) Fixed Depositsii) Short Term Depositiii) Scheme Deposit iv) Bank Account.
Credit Service
The City Bank Ltd.'s credit portfolio includes term, continues and exports related loans.
The City Bank Ltd.'s credit facilities are also reasonably better than other local banks. It's
interest rate ranges from 10% to 16.5%. Although the rate is little bit higher than other
Nationalized Commercial Banks, but average customers are ready to pay such interests
because of their faster and quality services.
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At present The City Bank Ltd. finances in the schemes:
i. Term Loan to Large and Medium Scale Industries.
ii. Working Capital & Commercial Lending.
iii. Housing finance.
iv. Import finance.
v. Export finance.
vi. Agriculture.
vii. Transport Loan
viii. Education Credit Scheme
ix. Multipurpose Loan Scheme [specially designed to extend credit facilities to meet
Educational (admission & examination fee), Medical & Tourism Expenses to for
one to two years].
x. Lease Financing.
Fund transfers
The following functions / instruments are included in this category:
1. Telegraphic Transfer (TT).
2. Demand Draft (DD).
3. Mail Transfer (MT).
4. Payment Order (PO).
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5. Traveler’s Cheque.
Export
The export business includes the following services:
1. Bill purchase / discounts.
2. Bill negotiation.
3. Bill collection.
4. Letter of credit advising and confirming.
Import
Import business includes:
1. Opening letter of credit (L/C).
2. Retirement of import documents.
3. Issuance of shipping guarantee.
Guarantees
It includes the following services:
1. Bid bonds.
2. Performance bonds and advance payment guarantees (AGP).
3. Guarantees against foreign counter guarantees.
4. Letter of guarantee (LG).
Securities
It includes the following:
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1. Sales and encashment of government securities (BSP, PSP etc.).
2. Banker to the issue for IPO.
Agency and Other
It includes the following:
1. Clearing / collection of cheques and other instruments on behalf of the customers.
2. Locker service at selected branches. Three (3) sizes of lockers are available: small,
medium, and large, annual charges ranging from Tk. 1500 to Tk. 4000 is applicable.
LIST OF NEW PRODUCT:
For the first time in the history of City Bank, SME Banking business processes are going
to be driven thru a centralized platform model. This is a fundamental move away from a 25 years
legacy system of decentralized geography based branch banking model. We all know this
Transformation process and momentum is already in place. This would be completed by 2008.
City Onayash – earn easy on your savings account, earn profit every month!
City Onayash is a unique kind of savings account which calculates interest on your daily balance
and pays interest to you every month.
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City Shomridhdhi - A unique offer from City Bank. City Shomridhdhi is an exceptional
DPS product that is distinctly more attractive than the prevalent DPS products in the market. You
receive a hefty sum at the end of the term against your monthly deposit of small installments. It's
a perfect way to secure your financial future!
City Projonmo – financial safety for your future generations backed by complete
immense protection! City Projonmo is a unique monthly deposit scheme that you open for your
kids to safeguard their future against all uncertainties and risks. As a guardian of the child you
can open this account which builds great & unmatchable savings for you over the years. By the
time your child is past his or her school age, there is this sufficient cash in your hand to take care
of his / her higher education, marriage or other such large expenses.
City Ichchapurun – great opportunity to earn against your savings every month! This
product allows you to earn interest and enjoy interest every month that accrues in your fixed
deposit account, no matter what the term of the deposit is. It helps make your financial planning
more disciplined, and your life more organized. While your fixed deposit remains untouched and
well-kept for future, you keep on getting the profit on a monthly basis. What better way to take
care of your monthly recurring expenses like children’s education or school fees, house tutor’s
remuneration, utility bill payments, saving money in some DPS scheme.
Owning a car is no longer a luxury. Car for your family is now a matter of fulfilling a
necessity. Appreciating that basic need, City Bank introduces City Drive, a tailor-made auto loan
scheme for individuals.
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Dream Vacation? Son's admission to a foreign university? Medical treatment? Daughter's
wedding? House renovation. Whatever the occasion or requirement may be, City Solution - any
personal loan from City Bank - is there to solve all your problems and to fulfill all your dreams.
You can access this facility from our selected branches across the country.
CITY Visa Electron Debit Card - By your side, round the clock. Now comes the Visa
Debit Card from City Bank. Your life, therefore, becomes hassle-free and safe; and it is Visa
Electron branded, which makes you the proud owner of a meaningful plastic
City Bank is the first bank to issue Dual Currency Credit Card in Bangladesh. This card
enables you simultaneous usage of your card both in home and in abroad. You do not need to
carry two different cards for the same purpose.
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By your side - all the way. The city Bank's Foreign Remittance unit meets growing
customer needs for fast, secure & easy money transfers to an extensive range of destinations.
Being a committed bank to its customers, we go all the lengths to remit your hard earned money
safely to your loved ones. With us, apart from a range of high-class modem remittance solutions,
you will get peace of mind which we believe counts to most.
#####################
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Scope of the organization:
We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those
Standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation. We believe that
our audit provides a reasonable basis for our opinion.
We observed that:
a) Bank is required to make provision on Employee Gratuity Expenses as per requirement of the
Bangladesh Accounting Standard (BAS)-19. This year the bank has made actuarial valuation on
Gratuity Expenses showing deficit of provision of Taka 255,399,543 as of August 2008 under
the assumption of continuing the fund. There is a shortfall of provision amounting to Taka
207,062,200 as of December 31, 2008 after considering additions and payment made in this
regard.
b) During the year loans and advances aggregating to Taka 372,896,000 has been written off
against which provision for bad and doubtful debts were made in the year 2006, 2007 and 2008.
The Bank has filed court cases against such advances on different dates in the year 2006, 2007
and 2008 which are pending on the date of Balance Sheet. On verification, we observe that
income tax benefit has been claimed against such written off loans and advances which is subject
to approval of the Income Tax Authority. In our opinion, except for the effect on the financial
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statements of the matter referred to in the preceding paragraphs, the financial statements,
prepared in accordance with Bangladesh Accounting Standards (BAS), give a true and fair view
of the state of the bank's affairs as of December 31, 2008, and of the results of its operations and
its cash flows for the year then ended and comply with the applicable sections of the Bank
Companies Act 1991, the rules and regulations issued by the Bangladesh Bank, the Companies
Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations.
Subject to the above, we also report that:
i) We have obtained all the information and explanations which to the best of our
knowledge and belief, were necessary for the purposes of our audit and made due verification
thereof;
ii) In our opinion, proper books of account as required by law have been kept by the
company so far as it appeared from our examination of those books and proper returns adequate
for the purposes of our audit have been received from branches not visited by us.
iii) The bank's balance sheet and profit and loss account dealt with by the report are in
agreement with the books of account and returns.
iv) The expenditure incurred was for the purposes of the bank's business;
v) The financial position of the bank at December 31, 2008 and the profit for the year
then ended have been properly reflected in the financial statements; the financial statements have
been prepared in accordance with the generally accepted accounting principles;
vi) The financial statements have drawn up in conformity with the Bank Companies Act
1991 and in accordance with the accounting rules and regulations issued by Bangladesh Bank;
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vii) Adequate provisions have been made for advances which are in our opinion, doubtful
of recovery;
viii) The financial statements conform to the prescribed standards set in the accounting
regulations issued by the Bangladesh Bank after consultation with the professional accounting
bodies of Bangladesh;
ix) The records and statements submitted by the branches have been properly maintained
and consolidated in the financial statements.
x) The information and explanations required by us have been received and found
satisfactory;
xi) We were not aware of any other matters, which are required to be brought to the
notice of the shareholders of the bank;
xii) 80% of the risk-weighted assets of the branches allocated for audit have been audited
by us.
SWOT ANALYSIS
Strengths:
1. The City Bank Ltd. has gained reputation through clean and posh interior design of
lay out. It also provides prompt services with higher degree of secrecy.
2. It has a good management team and disciplined work force.
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3. The City Bank Ltd. abides a set of core values-
Responsive to customers needs.
Professional in manager striving for excellence.
4. Installation of good communication system that enables the Bank to have on time
communication with all branches which reduces excessive paper work and saves
time for valued customers transaction.
Weakness:
5. Service charge in some areas is higher than that of the nationalized banks, which
discourage middle class customers.
6. There in no overtime allowance for employees who have to stay in the bank till 8
p.m. It demotivates those employees.
7. Now a day, most of the customers expect personalized service, which The City Bank
Ltd. can provide during the business hour.
Opportunities:
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1. Opportunity retail banking lies in the fact that the country's increased population is
gradually learning to adopt consumer finance. So, the retail lending products have
opportunities to tap the market of middle class service holders.
2. Bangladesh is a developing country. The investment potential of Bangladesh is
attracting foreign investors. So, The City Bank Ltd. has opportunity of expansion in
business.
Threats:
Some foreign banks and private banks are threat to The City Bank Ltd. like Dhaka Bank,
Prime Bank, Dutch-Bangla Bank etc.
CONCLUSION
Banking has changed enormously in the last decade. Management of bank credit is
becoming complex because of fast growing needs of the economy in the context of
changing business scenario in the increasing competitive environment of today in which
the banks are functioning. Banking sector is considered to be one of the key areas of
financial institutions. I tried to discuss the organizational issues highlighting the positive
and negative aspects and opportunities as well as the basic orientation of the bank in
the first section. Then I mainly focused on the recovery performance of various types of
loans of The City Bank Ltd. as well as tried to compare the credit recovery of classified
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and unclassified loans and advances between The City Bank Ltd. and Prime Bank Ltd. in
the center part of the report. During the analysis I have seen that Prime Bank Ltd. is
doing better than The City Bank Ltd. in the recovery of unclassified loans and advances
but The City Bank Ltd. is ahead in the recovery field of classified loans. The overall view
is that The City Bank Ltd. is moderately doing better in the recovery of its outstanding
loans and advances. Since the banking sector is getting competitive The City Bank Ltd.
must follow a strong recovery and loan management system for faster service to its
customers. It is expected that The City Bank Ltd. continues to prosper in the coming
days and the management should boldly navigate the organization in this turbulent
ocean of competition as the bank embarks in to a new millennium.
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