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A Working Report on
The Risk Assessment of Mutual Trust Bank Ltd







By
Muhammad Nazmul Amin
ID# 2009-2-10-296





An Internship Report Presented as the Partial Fulfillment of the
Requirements for the Degree Bachelors of Business Administration




East West University (EWU)
27
th
August, 2013





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A Working Report on
The Risk Assessment of Mutual Trust Bank Ltd







By
Muhammad Nazmul Amin
ID# 2009-2-10-296





This report has been approved by
Kashfia Ahmed
Assistant Professor
Department of Business Administration
East West University







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Letter of Transmittal


27 August, 2013

Kashfia Ahmed
Assistant Professor
Department of Business Administration
East West University

Subject: Submission of Internship Report

Dear Mam,
With due respect, I would like to thank you for assisting me to prepare the internship report.
This task has given me the opportunity to explore the activities of banking sector. The report
contains a working procedure of General Banking Department which is based on its
operational activities and the Risk Assessment of Mutual Trust Bank Limited. It was a great
pleasure for me to have the opportunity to work on this bank which remains a very well
position than other bank in Bangladesh. I endeavor my best to come out with a good one.

I would be very happy to provide you with any clarification regarding the report. Please
contact with me if you have any query. Therefore, I pray and hope that you would be kind
enough to accept my Internship Report and oblige thereby.
Sincerely Yours,

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Muhammad Nazmul Amin
ID# 2009-2-10-296
Department of Business Administration,
East West University

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Acknowledgement

Completion of anything requires supports from various sources. I am very much fortunate to
get the sincere guidance and supervision from a number of persons.
My sincere gratitude goes to Mr. Abdul Latif, SVP & Manager of MTBL Baridhara branch,
for reviewing the whole report so carefully and for giving me valuable advices and
suggestions to complete the whole thing in a right manner.
My heartiest gratitude also goes to the Mr. Md. Shahinoor Rahman, JAVP & DM as well
as to other Officers of MTBL Baridhara Branch who have been so kind and helpful to me
during my Internship period. They helped me in every possible way even though they used to
remain busy all through the day. Their contribution towards this report is worth than ever. It
was a great honor to work with such kind, hard-working and helpful officers.
I am deeply indebted to my Supervisor Kashfia Ahmed, Assistant Professor of Dept. of
Business Administration (East West University) for her whole-hearted supervision to me.
Without her supportive hand and recommendations, it would be difficult for me to complete
this Report.
Thanks for all from the core of my heart.






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Executive Summary

Now-a-days banking sector is modernizing and expanding its hand in different financial
events every day. At the same time the banking process is becoming faster, easier and is
becoming wider. Mutual Trust Bank LTD is a third generation private bank in Bangladesh. It
started its operation in 1999. The Company (Bank) operates financial activities through its
Head Office situated at Gulshan Dhaka and 83 branches. MTB provides various Consumer
Banking Products, such as- Brick by Brick Savings Scheme, Monthly Benefit Plan, Save
Everyday Plan, Childrens Education Plan, Consumer Credit Scheme,Best Invest Plan.

Beside these, Banking services of MTBL include Online Banking Service, MTBL Tele
Banking Services, SWIFT Services, Pay Order, Demand Draft (DD) Issue, MTBL SMS
Banking, Locker Service, Credit Card Service, and Visa Electronic Debit Card Service.
Panthapath branch is the 51stBranch of MTBL which is the most profitable branch of MTBL.
This branch is structured with General Banking & Advance Department and this branch is
supervised under one SVP & one JAVP. General Banking consists three different sections in
this branch and these are: Front Desk, Accounts Department and Cash Counter Section.
Various activities are carried out under these three sections, such as- opening of an account,
issuing of cheque books, closing of an account, stopping payment & dishonoring of a cheque,
transfer, clearing, bills collection, cash payment and cash receipt.

MTBL offers different types of account, these are- Current Deposit, Savings Deposit, Short
Term Deposit and Fixed Deposit Receipt. There are some other types of accounts which are
basically known as Festival Shanchay Prokalpa (FSP) that are offered due to different types
of religious festivals. There are several prerequisites for opening an account. After opening an
account MTBL issues a fresh cheque against that account. A client can ask for a new cheque
book for his/her old account through the requisition slip. If the cheque is lost by the client
then theres an opportunity to have a duplicate cheque book from MTBL. Moreover, MTBL
gives the opportunity to transfer an account from one branch to another branch of MTBL.
Upon the request of a customer, an account can be closed. A banker can also close the
account of his customer or stop the operation of the account under several considerable

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circumstances. A banker can stop payment of cheque of his customer under several
considerable circumstances. If the cheque is dishonored, MTBL sends a memorandum
(cheque return memo) to the customer stating all the reasons. Those documents that are enter
in the branch or exit of the branch must go through dispatch section. MTBL Baridhara
Branch receives different types of instruments, such as cheque, PO, DD etc. from its
customers for collection. It also pays on behalf of its customers for those instruments that
come to it through clearing house. The amount of Cheques, Pay Order (P.O), and Demand
Draft (D.D) Collection from other banks on behalf of its customer is a basic function of a
Clearing Department. Clearing is a system by which a bank can collect customers fund from
one bank to another through clearing house. There are two types of clearing and they are-
Outward Clearing & Inward Clearing. Beside this, customer does pay and receive bill from
their counterpart as a result of transaction. Commercial banks duty is to collect bills on
behalf of their customer. There are two types of bills for collection and they are- Outward
Bills for Collection (OBC) & Inward Bills for Collection (IBC). The cash section plays a
significant role. It is a very sensitive part of the bank because it deals with most liquid assets.
Mutual Trust Bank Limited, Baridhara Branch has a well equip cash section. This section
receives cash from depositors and pays cash against cheque, Demand draft, Pay order, and
Pay-in-Slip over the counter. The main functions of this section are cash receipt and cash
payment. Mutual Trust Bank Ltd. has an established and most importantly a reliable General
Banking section.
The risk conditions of MTB compare to other banks is comparatively low. Liquidity
condition of this bank is so strong. Again to manage the different risk MTB has an
independent Risk Management Unit (RMU), which works deliberately to protect the risks of
the bank and monitor overall risk management performance.
Mutual Trust Bank fulfills the consumer needs in almost every case with its dignity and
honor. MTBL wants to be in the top most position in private banking sector of Bangladesh.






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CHAPTER 01
Introduction











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1. INTRODUCTION

In general sense we mean Bank as a financial institution that deals with money. There are
different types of banks like Central bank, Commercial bank, Savings bank, Investment bank,
Merchant bank, Co-operative bank etc. But when we use the term bank it generally means
commercial bank that is one which is concerned with accepting deposit of money from the
public, repaying on demand or otherwise and withdraw able on demand or otherwise and
employing the deposits in the form of loan and investment to meet the financial needs of
business and other classes of society.

Now-a-days banking sector is modernizing and expanding its hand in different financial
events every day. At the same time the banking process is becoming faster, easier and is
becoming wider. In order to survive in the competitive field of the banking sector all
organizations are looking for better service opportunities to provide their fellow clients. So it
has become essential for every person to have some idea on the bank and banking procedure.

Mutual Trust Bank is a financial institution whose main objective is the mobilization of fund
from surplus unit to deficit unit. In the process of acceptance of deposits and provision of
loan, Bank creates money. This characteristics feature sets Bank apart from other financial
institution. The bank can influence the money supply through lending and investment. The
bank is an economic institution whose main objective is to earn profit through exchange of
money and credit instruments.

1.1 Origin of the Report
As a part of academic requirement of completing Bachelors of Business Administration
(BBA), every student needs to undergo an Internship/Project program. Now you may ask
what an Internship is. Well Internship is an agreement between a university and an
organization that offers an opportunity for students like us to undertake a temporary work
assignment in the organization which enables us to have a realistic exposure to job and
organizational conditions. It is called an earn while you learn program of training. It helps us
bridge up the gap between classroom learning and actual job conditions eventually preparing

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us for a prospective job. According to my experience an internship is a perfect blend of
theoretical and practical knowledge. Although it is not a compulsory in many universities in
the country, but in East West University it is a mandatory course for all. In fact it weighs 3
credits out of 123 for completion of BBA. It has to cover duration of at least 8 to 10 weeks
under a supervisor assigned by the students perspective departments.
This report is originated for the fulfillment of my internship program for which I have been
placed in one of the best reputed private banks in the country-Mutual Trust Bank Ltd. I
worked in the General Banking Division, Baridhara Branch for about 3 months starting from
20
th
May 2013 to 22
nd
August 2013. And as assigned the report I came up with is about the
Risk Assessment of Mutual Trust Bank Ltd.

1.2 Scope of the Report
I always disliked the fact what my other fellow students did that they always chose studying
the department they are assigned at, as their report topic, which according to me is the easiest
way to get through as department information is all readily available in the company websites
and there is nothing new to find out or research. Thus I have arranged my report in a way that
the first part gives all the Company Details starting from its history to its recent products,
services and likewise. In the second part I put information about the 3 most important
divisions of a MTBL which are General Banking Division, Credit Division and finally the
Foreign Exchange Division.
Then the last part contains my ultimate report which may be very insignificant to great
researchers but at least I have attempted to do something which requires some studying and
investigating- The Risk Assessment of Mutual Trust Bank Ltd.

1.3 Limitation of the Report
Mutual Trust Bank is one of the new generation banks of Bangladesh. There were
innumerous topics to be researched and studied but that could not happen due to lack of time,
information and other accessibilities.

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Data collection was the biggest pain ever. I could sense a little bit of fear factor in all
employee levels regarding the sharing of data whereas I have not asked them any confidential
data.
In the company part all the departments could not be presented in an elaborative way. It is
due to lack of accessibility and most of all the employees reluctance to talk about anything
without a favor in return.
I have used many useful ratios and graphs to present my analysis along financial
statements of the past 3 years starting from 2010 to 2012. Again my study was limited to the
data given by the organization only. No external factors could be measured which is highly
critical to Risk Factors of any private banks of Bangladesh.
Also there are many soft wares nowadays to assess bank risk factors but I was not literate
of that either. So my study and conclusions are all based on the ratios and trends in financial
data.
The information obtained was directly used for analysis. They could not be checked or
verified for 100% accuracy

1.4 Methodology
I have used both primary and secondary sources very thoroughly for information. I could
manage the primary source while I worked there physically. Every now and then I tried to
talk to different officials to find out relevant facts even in unofficial manners like in tea
breaks and lunch breaks. And talking about secondary source I have used to the fullest extent
possible. My readers, you will get that very evidence and gain confidence over my report if
you just check the bibliography at the end of this report. Whatever data I received, I tried to
recheck them from other different sources to confirm accuracy. For example I got MTBLs
financial statements from their companys website and I rechecked them with the ones posted
in the website of Dhaka Stock Exchange.
Primary Sources:
Practical experience and desk work.
Personal observation and discussion with staff members

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Interview of different officials including the Deputy Manager of the branch.
Secondary Sources:
Annual reports of MTBL of the years 2010,2011and 2012.
CDs from Dhaka Stock Exchange
A few Financial Institution and Risk Management related Text Books
Financial articles in Newspaper
Circulars published by Bangladesh Bank
Other relevant data from the Internet.

















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CHAPTER 02
An Overview
Of
MUTUAL TRUST BANK LIMITED





.




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1.1 Introduction of MTBL

Mutual Trust Bank Limited (MTBL) is a Public Limited Company by shares in the
Bangladesh, with commendable operating performance. Directed by the mission to provide
with prompt and efficient services to clients, MTBL provides a wide range of commercial
banking services also. The bank has achieved success among its peer group within a short
span of time with its professional and dedicated team of management having long experience,
commendable knowledge and expertise in convention with modern banking. With all the
resources, management of the bank firmly believes that the bank would be able to encounter
problems that may arise both at micro and macro economic levels.

2.2 Historical Background of MTBL
The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a
public company limited by shares for carrying out all kinds of banking activities with
Authorized Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.10
each.
The Company was also issued Certificate for Commencement of Business on the same day
and was granted license on October 05, 1999 by Bangladesh Bank under the Banking
Companies Act 1991 and started its banking operation on October 24, 1999. The bank
conducts all types of commercial banking activities including foreign exchange business and
other financial services. During the first two years of operations, the bank's main focus was
on the delivery of personalized customer services and expansion of its clientele base.
As envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under
the provisions of the Banking Companies Act 1991, the Company started its banking
operation and entitled to carry out the following types of banking business:
1. All types of commercial banking activities including Money Market operations.
2. Investment in Merchant Banking activities.
3. Investment in Company activities.
4. Financiers, Promoters, Capitalists etc.

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5. Financial Intermediary Services.
6. Any related Financial Services.
The Company (Bank) operates financial activities through its Head Office situated at Dhaka
and 83 branches. The Bank carries out international business through a Global Network of
Foreign Correspondent Banks.
Memberships of MTBL
1. Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI, D)
2. The Institute of Bankers Bangladesh (IBB)
3. Bangladesh Foreign Exchange Dealers Association (BAFEDA)
4. Bangladesh Institute of Bank Management (BIBM)
5. International Chamber of Commerce Bangladesh Limited (ICCB)
6. Association of Bankers Bangladesh Limited (ABB)
7. Bangladesh Association of Publicly Listed Companies (BAPLC)
8. American Chamber of Commerce in Bangladesh (AMCHAM)

2.3 Mission & Vision of MTBL
Mission
We aspire to be one of the most admired banks in the nation and be recognized as an
innovative and client-focused company, enabled by cutting-edge technology, a dynamic
workforce and a wide array of financial products and services.--- MTBL Group.
Vision
Mutual Trust Bank's vision is based on a philosophy known as MTB3V. The organization
envisions MTB to be:
1. One of the Best Performing Banks in Bangladesh.
2. The Bank of Choice.
3. A Truly World-class Bank.

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2.4 Banks Philosophy
With the mission to become a dependable client focused financial institution in the country
by proving service with trust and integrity.

2.5 Objectives
The main object of the Mutual Trust Bank Limited (MTBL) had been to offer an interest free
banking system in the financial market. Apart from that, the bank started its operation in the
country with a view to realizing the following objectives:
To establish a partnership relationship with customers and to eliminate the idea of the
debtor-creditor relationship of traditional banks.
To establish welfare oriented banking system.
To mobilize savings towards productive sectors.
To invest on profit and risk sharing basis.
To accept deposits on profit and loss sharing basis.
To create employment opportunities by investing savings towards prospective
economic sectors.
To extend banking services towards the poor, helpless and low-income group of
people in the society in order to uplift of their standard of living.
To contribute to establishment of a society by equitable distribution of wealth.
To establish justice in trade and commerce in the country.
To render services for the economic development of the nation.

2.6. Functions
The functions of Mutual Trust Bank Limited are as follows:
To maintain all types of deposit accounts with online facilities.
To conduct foreign exchange business.
To extend other banking services.
To conduct social welfare activities.


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2.7 Products and Services

2.7.1 Retail Banking Products
MTBL aims to satisfy all clients, regardless of how big or small they may be. Individuals are
counseled on the best type of accounts suitable to them such as Current, Savings, Short Term
Deposits, Fixed Deposits, Consumer Asset and Liability Products, etc.
Apart from the conventional banking operations MTB strives to introduce an array of
products and services and already launched a number of consumer banking products with the
aim of popularizing consumer banking operations and offer higher return to its clients.

MTB Retail Banking Products are:
Regular Savings Account
Current Account
Brick by Brick
MTB Double Saver
MTB Education Plan
Fixed Deposit
MTB Millionaire Plan
Monthly Benefit Plan
MTB Inspire
MTB Ruby
MTB Junior
MTB Graduate
MTB Senior
MTB Shanchay
MTB Kotipati
MTB Care


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Regular Savings Account :

Features and Benefits:

Wide network of branches
Access to largest ATM fleet of the country
Bank conveniently with facilities like Internet Banking and SMS Banking
Cheque-book facility
Opportunity to apply for safe deposit locker facility
Collect foreign remittance in both T.C. & Taka draft.
Transfer of fund from one branch to another by Demand Draft /Telegraphic
Transfer
Online banking service

Current Account:
A Current account is ideal for carrying out day-to-day business transactions. With the
MTB Regular Current Account, anybody can access his/her account anytime, anywhere,
pay using payable at par cheques or deposit cheque at any MTB bank branch.


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Features and Benefits:
Wide network of branches
Access to largest ATM fleet of the country
Bank conveniently with facilities like Internet Banking and SMS Banking
Cheque-book facility
Opportunity to apply for safe deposit locker facility
Collect foreign remittance in both T.C. & Taka draft.
Transfer of fund from one branch to another by Demand Draft /Telegraphic
Transfer
Online banking service

Brick by Brick:

Features and Benefits:

No initial deposit required
The monthly installment of this Plan is BDT 250/-, 500/-, 1,000/-, 2,000/-, 5,000/- and can
be multiples of BDT 500/-
The savings periods are 3,5, 8 and 10 years
No hassle of depositing money from long queue, rather option of depositing installment
through standing instruction.


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Monthly installment & Maturity Amount

Monthly installment 3 Years 5 Years 8 Years 10 Years
250/- 10,913.00 20,734.00 40,743.00 58,751.00
500/- 21,826.00 41,468.00 81,487.00 117,502.00
1,000/- 43,652.00 82,936.00 162,974.00 235,004.00
2,000/- 87,304.00 165,872.00 325,948.00 470,008.00
5,000/- 218,260.00 414,680.00 814,870.00 1,175,020.00


MTB Double Saver:



MTB Double Saver is a fixed deposit scheme where the deposit doubles in 6 (six) years

Features and Benefits:
Minimum Deposit amount of Tk. 50,000/- or its multiple and there is no limit for
maximum amount
The deposit amount will be double in 6 years
Customers can avail credit facility up to 90% of deposit amount
More than one account can be opened by the same depositor
Customer can encash the facility before maturity

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MTB Education Plan:

Features and Benefits:
No initial deposit required
Monthly installments are Tk. 1000 or multiples of Tk. 1000 but not exceeding Tk 20,000
The savings periods are 4, 7, 9 and 12 years
No hassle of depositing money from long queue, rather option of depositing installment
through standing instruction
Overdraft facility against deposited amount

Fixed Deposit:

Automatic renewals: Upon maturity, your deposit will be automatically renewed for the same
tenor at the prevailing interest rate unless you instruct otherwise.
Overdraft facility: You can use your Fixed Deposit as collateral to apply for an overdraft
facility at a competitive rate.

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MTB Interest Rates on Fixed Deposit

Types of Deposit Interest Rate
1. Savings Deposits
a) MTB Regular 5.50%
b) NRB 5.75%
2. Special Notice Deposits (SND)
Below BDT 10.00 million 5.00%
BDT 10.00 million to below BDT 250.00 million 6.00%
BDT 250.00 million to below BDT 1.00 billion 8.00%
BDT 1.00 billion and above 11.00%

3. Fixed Deposits:
1 month
Any Amount 9.00%
3 months
Any Amount 12.00%
6 months
Any Amount 12.00%
12 months
Any Amount 12.00%
4. MTB Monthly Benefit Plan (12 months) BDT 1,000.00 per lac @
12.00%
(before Tax)


MTB Millionaire Plan:

Monthly installment & Deposit:

Monthly installment Year Payable after the tenure (in BDT)
9,400.00 6 1,000,000.00
6,140.00 8 1,000,000.00
4,260.00 10 1,000,000.00
3,060.00 12 1,000,000.00
1,950.00 15 1,000,000.00
1,030.00 20 1,000,000.00

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Monthly Benefit Plan:

Features and Benefits:

The minimum deposit is Tk. 100,000/= or in multiples of Tk. 100,000/=
This plan is for 1 (one) year term.
You will require to open a savings/ current account. Monthly income will be credited to
your account

Sample Return Table shown below:

Deposited
Amount
Tenure
Monthly Benefit
(before tax)
Monthly Benefit
for TIN holder
(deduction of
10% source tax)
Monthly Benefit
for non-TIN
holder (deduction
of 15% source
tax)
100,000.00 1 Year 1,000.00 900.00 850.00
200,000.00 1 Year 2,000.00 1,800.00 1,700.00
300,000.00 1 Year 3,000.00 2,700.00 2,550.00
400,000.00 1 Year 4,000.00 3,600.00 3,400.00
500,000.00 1 Year 5,000.00 4,500.00 4,250.00






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MTB Inspire:
MTB Inspire provides a range of enhanced services, while letting you enjoy unique benefits
of getting return on your deposit monthly instead of traditional half yearly. With extra access
and convenience of banking, enjoy the full convenience of a savings account and access your
savings anytime.

Elegibility:
Must be a citizen of Bangladesh
Age 18
Features:
Interest calculated on daily basis and paid monthly
Free Debit Card*
Free internet banking
Online banking facility across MTB branches and access to largest ATM network
MTB Ruby:
MTB Ruby enables todays independent women to enjoy hassle-free banking services.
Besides the core MTB banking advantage, MTB Ruby, an exclusive savings account for
women, is packed with special benefits for our women customers. Enjoy your present and
plan for the future, with this rewarding savings account.

Features and Benefits:
Interest will add on daily basis and it will be credited monthly
Higher interest rate


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Minimum account opening balance is Tk 10,000. Minimum daily qualifying balance to
earn interest is Tk 10,000
No debit card fee for 1st year
Free Internet Banking

MTB Junior:

We know how important it is to plan for child's financial security. MTB has the solution to
help anyone do that while showing the virtue of saving, in child. MTB Junior is a savings
account for minors that offer the opportunity to save for today and the future.

Eligibility:

MTB Junior is a savings account for school and college students below 18 years.

Features:
Attractive interest rate
Free debit card
Free internet banking.
No account maintenance fee

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MTB Graduate:


Eligibility:

MTB Graduate is a savings account for college and university students who are 18 years
and above.

Features:

Attractive interest rate
Interest adds on daily and pays out monthly
Free debit card
Free internet banking
No account maintenance fee.

MTB Senior:



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MTB Senior has been designed keeping in mind the fact that a senior citizen's banking
requirements are wholly different and deserve special attention. We like to empower our
senior citizens, so that they can carry out their day-to-day banking transactions
independently, and with dignity and confidence. Now the true pleasure of seniority in your
grip!
Eligibility:

Must be a citizen of Bangladesh
Age 60 and above

Features:

Lifetime free Debit Card
Free internet banking
Attractive discount on locker charge
Free cheque books*
Interest calculated on daily basis and paid monthly
Unlimited transactions
Online banking facility across MTB branches and access to largest ATM network

2.7.2. Banking services:
Online Banking Service
Mutual Trust Bank is playing a pioneering role among its competitors in providing real time
online banking facilities to its customers. Mutual Trust Bank online banking offers a
customer to deposit or withdraw any sum of money from any branch anywhere. Any account
holder having an account with the bank can avail this service.
Facilities available at present:
- Access account from anywhere in the world through a telephone.
- Ability to make balance inquiries without visiting the bank.
- Ability to listen to last 5 transaction detail over the phone.
- Provides a language selection being available in English and Bangla.

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MTBL Tele Banking Services:
The centralized Tele Banking service introduced in the Bank brings a world of banking
convenience to the customers. Through the Tele Banking System, customers can access their
Bank Accounts over the telephone on a 24X7 basis. The facility is secure as the customer is
given a unique identification number to access his bank account through the telephone. The
voice response system prompts the customer to dial the digits that will help him/ her meet his
requirement of placing instructions or retrieving account information.

MTB Contact Centre is now at your service 24 hours a day 7 days a week and 365 days a
year. To have the services please dial the following numbers:

In Bangladesh: 16219 or 096040 16219
From Overseas: +880 96040 16219

The services can be availed through the MTB Contact Centre are:

Retail Deposits & Loan Product Enquiries
Requests & Requisitions for Statements & Cheque Books
Accounts Services
Cards Services
SME, NRB & Remittance Enquiries
Customer Feedback




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SWIFT Services
The Society for Worldwide Inter-bank Financial Telecommunication or S.W.I.F.T. is a
worldwide community. 7,800 financial institutions in 200 countries connected to one another
through SWIFT. In their own word SWIFT "consistently delivers quantifiable business value
and proven technical excellence to its members through its comprehensive messaging
standards, the security, reliability and five nines availability of its messaging platform and
its role in advancing STP. The guiding principles of SWIFT are clear: to offer the financial
services industry a common platform of advanced technology and access to shared solutions
through which each member can build its competitive edge." Mutual Trust Bank has already
become the member of SWIFT community and has started its operation from March 2004.
With introduction of SWIFT, MTB ensures its customers the quickest and most secured
financial transaction around the world.

Pay Order
MTBL provide this type of service. When clients want to give money to others for any
purpose they can give pay order. It is safe because they should not carry the money and the
receivers can encash the money. There is no option for dishonor, the client have to deposit
money before do PO. The commission of the PO is given below:

Demand Draft (DD) Issue
Sometimes customers use demand draft for the transfer of money from one place to another.
It is must need for sending money outside Dhaka city. MTBL charges .15% commission on
the face value of DD as service charge.


MTB SMS Banking brings your account to your fingertips--- MTBL Group. It enables
customers to send and receive textual information anywhere 7 days a week and 24 hours a
day. It allows them to access information as well as receive transaction alerts on their account
by using their mobile phone.

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Facilities available at present

ty to make balance inquiries without visiting the bank.


POS transaction on their account.

Locker Service
MTBL provide locker service to their clients. Clients can rent a locker for one year. Every
year they have to pay a fee. They can keep any documents, ornaments and valuable thing in
the locker. One key is given to the clients. There are three types of locker at MTBL: small,
medium and big. The fee of this locker is Taka 1500, 2000, and 2500.

Credit Card Service
Bank Name: Mutual Trust Bank Ltd.
Card Type: Local gold & Local Classic credit card
Description:
50% Cash Advance facility.
Useable at all ATMs bearing Visa logo.
5000 outlets for shopping in Bangladesh.
Buy now pays later.
Up to 45 Days Interest free period.


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Visa Electronic Debit Card Service:
Bank Name: Mutual Trust Bank Ltd.
Card Type: Debit Card
Description: MTB Visa Electron Card will be offered to each and every
Savings, Current & STD Account holders of the Bank. This electron Card can be used at any
Dutch-Bangla Banks ATM all over the country.
No card fee for first year.
No transaction fees on POS & DBBL ATMs.
No time bindings for cash withdrawal.
No need to come to Branch for cash withdrawals.
There are 5000 outlets for shopping in Bangladesh.

MTB Internet Banking Service:

View account information, summary of all your accounts and access account statements
Order chequebook(s)
Transfer funds to any MTB account

Set up payees (within MTB), to whom you transfer funds
regularly
View credit card details and pay any MTB credit card bill
Pay utility bills
Manage your profile information




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2.7.3Organizational Hierarchy of MTBL:

At Mutual Trust Bank there is one Managing Director (MD) who mainly controls and
supervises the major divisions of this bank. He directly supervises the overall activities and
Divisions. One senior Executive Vice Presidents (SEVP) and Three Executive Vice President
(EVP) and two senior Vice President report to the Managing Director. Executive Vice
Presidents control the credit, loan administration, international, information technology, the
financial control & accounts division, treasury division, credit division,card division. Senior
Vice President controls the human resource and marketing divisions. The Vice Presidents
work under the Senior Executive Vice President and Executive Vice President Directly report
to the senior Executive Vice President (SEVP). The daily activities directly control by senior
Executive Vice President (SEVP).

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2.7.4 Management of MTBL:
For any financial and non-financial organization, management is the most valuable and
important aspect and a well organize management provides the organization to reach its
ultimate goal. Management means planning, organizing, staffing, directing and controlling of
all financial and non-financial resources of an organization. Different aspects of management
practice in Mutual Trust Bank are discussed below.

Planning: Mutual Trust Bank has done its planning within the preview of the
corporate plan. Each branch can make plan according to the goal imposed by the
corporate level. Mutual Trust Bank has a planning division. The department is mainly
responsible for the overall planning.

Organizing: Mutual Trust Bank is organized as per the existing business locations. It
has branches, each of which is a separate entity. Each unit is responsible for own
performance. Within each branch it is organized functionally.

Staffing: The recruitment in Mutual Trust Bank is done in two ways. One as a
MTO for the management program and it has a probation period of one year.
Another one is non-management level as Assistant officer. Management Trainee
Officer is recruited in officer category and their career path is headed towards
different managerial jobs.

Directing and Controlling: Works of Mutual Trust Bank are designed in such a way
that one leave without clearing the tasks as he is assigned for a day. Sitting
arrangement in all office is done in a way that the superior can monitor the
subordinate all time. Budgeting, rewarding, punishing, etc are also practiced as
control mechanism.


2.7.5 Corporate Culture
Mutual Trust Bank Limited is one of the most disciplined banks with a distinctive corporate
culture. Here they believe in shared meaning, shared under sting and shared sense making.
Their people can see and understand events, activities, objects and situation in a distinctive

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way. They should their manners and etiquette, character individually to suit the purpose of
the bank and the needs of the customers who are of paramount importance to them. The
people in the bank see themselves as a tight knit team/family that believes in working
together for growth. The corporate culture they belong has not been imposed. It has rather
been achieved through their corporate conduct.

Branch Control & Expansion Department (BCED): The duties of this division are
to preparing test key arrangement among the branches to maintain inter branch
accounts and overall control of the branches. Another most duties of this division are
to study the feasibility of opening new branches.

Public Relation Department (PRD): Another important division under
administration department is public relation division. The main activities of this
division are as follows:
Circulation of important notices
Issuance of power of attorney to the officers of the bank.
Customer service
Legal affairs
General correspondence within Bangladesh
Cash affairs of the bank


Financial Administration Department (FAD): This division can be called as the
central accounts division because all the account related are done here. All the
branches send their monthly statements to the Head office and this division prepares a
consolidated statement by using those branch statements, which shows monthly
position of the bank in cumulative basis.

Audit & Inspection Department (AID): This division works directly under the
control of the managing director. This division is responsible to arrange periodical
internal audit in each branch to conduct special audit, and to follow-up and monitor
the banks overall activities.



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Operational Department (OD): Under the operational department the following
divisions of Mutual Trust Bank limited conduct their respective works.
Credit division
Investment division
International division
Card division
Treasury operation division
Computer and Engineering division

Miscellaneous/Other Department: There are some other important divisions
performing their respective works for the success of Mutual Trust Bank Limited
which are as follows:
Marketing Division: Marketing division is directly related to the marketing of
the banks products and services to the customers. It takes all the arrangements
in deposit mobilization, customer service related activities and all other
marketing related activities. The main task of this division is to formulate
strategies for achieving banks corporate goals and objectives.

Training Division: The principal activities of the Staff Development and
Training Division (CHRM.3) are to design and implement staff development
and training plans to ensure that the Bank staff have at all times the necessary
knowledge, skills and competencies and that they are continuously being
developed for performance excellence in their current jobs and future
responsibilities. The division takes the lead for and coordinates the
implementation of the Bankss performance management system. The division
is also charges with the responsibility for charting out career paths and
planning for career succession. The division will ensure that each and every
staff is accorded and receive full consideration for developmental
opportunities to enhance their competencies, leadership skills and for career
advancement.




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2.7.6 Career Opportunity at MTBL:
Mutual Trust Bank is an equal opportunity employer, offering competitive compensation
packages, excellent career development programs and a friendly working environment. This
section of the website will be updated as and when any job vacancies arise.

2.7.7 Customer Services of MTBL:
Professional merit and Competency, Flexibility, Determination and Dedication are the core
resources that MTBL consider to be of paramount importance for building a client oriented
modern banking. Customer satisfaction is MTBL foremost professional undertaking.
Therefore, a satisfied client is MTBL precious product and they consider them MTBL
ambassador in the market.

















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Chapter 3
My Job at MTBL
Baridhara Branch









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3.1. Preface:
I was assigned at the Baridhara Branch of Mutual Trust Bank Limited to complete my
internship program. During my internship program I had a lot of fun, but most importantly I
realized how to work under the pressure of responsibilities. This practical orientation is
necessary for the development and preparation of a person before entering into the corporate
world. The things that I have learned at Mutual Trust Bank are:
Meaning of responsibility
Necessity of commitment
Punctuality and regularity is very important
Ability to interact with different sorts of people
Mutual Trust Bank Limited has always been prepared the internship program for its internees.
It is strictly followed by both parties. There are 3 different departments in
Baridhara branch and they are:
1. General Banking (GB)
2. NRB
3. Credit Department
I was rotated across all 3 different departments in the past 3 months. However, my main
concentration was General Banking section and thereby, I allocated maximum time to work at
GB section. Therefore, in this report I have described about my job responsibilities at GB.

3.2. Nature of the Job:
General Banking is the starting point of all the banking operating. General Banking
department aids in taking deposits and simultaneously provides some supplementary services.
It provides those customers who come frequently and those customers who come one time in
banking for enjoying supplementary services. In some general banking activities, there is no
relation between banker and customers who will take only one service form bank. On the
other hand, there are some customers with who bank are doing its business frequently. It is

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the department, which provides day-to-day services to the customers. Every day it receives
deposits from the customers and meets their demand for cash by honoring cheques. It opens
new accounts, demit funds, issue bank drafts and pay orders etc. since bank in confined to
provide the service everyday general banking is also known as retail banking.

The job was really hard at GB. I also had to hear a lot of complaints from the customers.
At first I was demoralized. But later on I learned how to deal with it.

3.3. Responsibilities & Learning:
As an intern in the MTBL (Baridhara branch) there were a number of activities in which
I was involved. The activities are given below:
Receiving cheques and pay order vouchers.
Preparing pay orders.
The process of account opening and closing, transfer of account.
Preparing KYC, TP.
Updating the record book of Clearing, FDR.
Administrative Activities like drafting letters or any other papers.
Assisting the person who works on auditing.
Assisting customers with necessary information.
Collecting necessary papers from customers such as- photocopy of National
ID card, Passport, Trade License etc.
Inputting data to and retrieving necessary information from Flora Software.
Beyond these Activities there were other tasks that I was given to accomplish related to
general banking activities. I have learned many things. The working pressure was high yet
pleasant. All the activities are based on this software Bank Flora.


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3.4 Observations:
It was very interesting working at Mutual Trust Bank. The people there are really nice and
talented. The things that I have noticed and observed are:
Work is never left pending for the next day unless it is absolutely necessary.
The work process could be made faster with better operating systems and Intra
Networking System.
A good job performance is always praised which motivates the employees.
There is always a rush of customers on this branch so the number of transaction is
high. Thereby, the employees remain very busy throughout the day.
The work activities are always set and divided for each of the employees. Each and
every employee has a certain set of responsibilities. He/she carries out those
responsibilities throughout the day. It is also easy to assign duties that way. Moreover, I
often saw everyone help each other out.









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CHAPTER 04
RISK ASSESSMENT OF MTBL








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4.1 Introduction
With the emergence of time, everything has changed into a new sophisticated version and
along with that made our lives more complex and difficult. Every day our market is growing,
technology is alleviating and the products and services we use are also enriching. No wonder
there is a mushroom of private banks in our country at this moment. Before going through
this internship program, I used to have a rear feeling that -except a few, all these banks are
surely facing great difficulties to survive in such a poor economy like ours.
However my idea really changed after having practical experience of 3 months first time in a
bank. I found it really challenging-the way these banks are flourishing in spite of the fact that
there are so many competitors and moreover a struggling economy. Therefore I could not
resist my curiosity to find out how they managed such a prominent existence carrying so
many risks in shoulder.
The last chapter that is chapter 3 is the project part of my internship report and as you may
already have guessed, it deals with the risk analysis of MTBL. In this section, as the title
already implies, I have showcased the most widely used financial indicators to measure both
the quality and quantity of MTBLs performance. It centers on the most important
dimensions of performance especially focusing on the banks risk associated with it. (All the
analysis has been done on the basis of my accessibility to company data).

4.2 Background of Banking in Bangladesh
The history of banking sector of Bangladesh is not new rather it started from the very
moment of independence. The banking system at independence consisted of two branch
offices of the former State Bank of Pakistan and seventeen large commercial banks, two of

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which were controlled by Bangladeshi interests and three by foreigners other than West
Pakistanis. There were fourteen smaller commercial banks. Virtually all banking services
were concentrated in urban areas. The newly independent government immediately
designated the Dhaka branch of the State Bank of Pakistan as the central bank and renamed it
the Bangladesh Bank. The central bank was responsible for regulating currency, controlling
credit and monetary policy, and administering exchange control and the official foreign
exchange reserves. The new banking system succeeded in establishing reasonably efficient
procedures for managing credit and foreign exchange. (News Bangladesh, The Economy of
Bangladesh: The Banking System, 2012, Para 1)

4.3 Current Status of Banking Sector of Bangladesh
As we all must have seen that the banking system of our country has grown very prominent.
They are striving to reach people at every corner of the country and is available almost
anywhere these days. Remarkably the private banks are one of the highest growth sectors of
the country at this moment. The number of banks in all now stands at in Bangladesh. Out of
the 55 banks, four are Nationalized Commercial Banks (NCBs), 38 local private commercial
banks, 9 foreign banks and the rest four are specialized banks.
However, regardless of all these facts, risks associated with this banking sector are many.
Bangladesh being a developing country has innumerous risks, especially financial risks are
inescapable. Although banks earn high yields, and trade finance in the emerging markets like
ours offers some of the highest returns available in conventional banking, there are many
drawbacks too. Balancing risk and reward is critical to maintaining profits and reputations in
an emerging market like in Bangladesh.


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4.4 Commercial Banks- The Risk Takers
Commercial banks are in the category of one of the riskiest businesses. In the process of
providing financial services, they assume various kinds of financial risks. Over the last
decade our understanding of the place of commercial banks within the financial sector has
improved substantially. We, the general public seek the services of these financial institutions
because of their ability to provide market knowledge, transaction efficiency and funding
capability. In performing these roles they genera lly act as a principal in the transaction. And
to do this they use their own balance sheet that is their assets and other funds to facilitate the
transaction and most importantly to absorb risk associated with it. However there are also
risky activities which do not have direct implication to the banks balance sheet. These
activities include agency and advisory activities. For example: trust and investment
management; private and public placement or facilitating contracts; underwriting; the
packaging, securitizing, distributing and servicing of loans in the relevant areas. Thus we
understand from here that a good amount of risk lies out of the banks balance sheet.
Nevertheless, the overwhelming majority of risks facing the banking firm are in their on-
balance-sheet businesses.
4.5 Why Banks Endeavor Risks?
Why do banks endeavor risks? Because it is about peoples money and since you are dealing
with other peoples (stakeholders) money, government is always on the scene to intervene.
This is how all the risks are originated. Every single bit of information has to be exposed in
public and thus you are reliable of all mistakes. Therefore in simpler words banks are always
in a risk of making mistakes of peoples money for which they will be held reliable. After all,
financial institutions are simply businesses, organized to maximize the value of the
shareholders wealth invested in the firm at an acceptable level of risk. The objectives of

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maximum or at least satisfactory profitability with a level of risk acceptable to the
institutions owners, is not easy to achieve, as recent institutions failure around the globe
suggest. Banking is a risk business; one mistake can wipe out a years profits or more.
Why are financial institutions under such heavy scrutiny today? As already mentioned above,
the key reason is that banks and other financial institutions rely heavily upon the open market
to raise the funds they need by selling stocks, bonds and likewise. Entry into the open
market to raise money means that a financial firms financial statements will be gone over
with a fine tooth comb by stock and bond market investors, credit rating agencies,
regulators, and scores of other people and institutions. (Rose & Hudgins, 2009-2010, pp.
163-164).

4.6 Extent of Risks Being Absorbed
Not all sorts of risks banks have to absorb. In a developing country like Bangladesh there are
uncountable types of risk factors. However, these commercial banks only need to worry about
the risks contained in the banks principal activities that is-those involving its own balance
sheet and its basic business of lending and borrowing, are not all borne by the bank itself. In
many instances the institution will eliminate or mitigate the financial risk associated with a
transaction by proper business practices or in other words it will shift the risk to other parties
through a combination of pricing and product design. Thus they only take risks at firm level
and solve them as efficiently as possible. However the extent of risk can be broadly divided
in two categories which are Systematic Risk and Unsystematic Risk.
Systematic Risk: This risk is also called Market Related Risk or Non-diversifiable Risk.
These type of risks cannot be eliminated no matter how much perfect a financial firm or its

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management is. However a firm can be advantageous if it takes precautious measures, the
extent of loss will be less compared to other firms.
Unsystematic Risk: This risk is also called Firm-specific or Company-unique Risk or
Diversifiable Risk. These types of risks can be reduced or eliminated altogether if the firm
has a good posture at all aspects. For each of the types of risk listed below, is mentioned
whether it is a systematic risk or an unsystematic risk.

4.7 Types of Risks Associated with Commercial Banks
What do we mean by the word perform when it comes to financial firms? In this case
performance refers to how adequately a financial firm meets the needs of its stockholders
(owners), employees, depositors and creditors, and other borrowing customers. At the same
time financial firms must find a way to keep government regulators satisfied that their
operating policies, loans and investments are sound, protecting the public interest. Therefore
a financial firm is fully entitled to all these responsibilities thus involving a lot of risks.
Risk to a manager of a bank or a financial institution means the perceived uncertainty
associated with a particular event. For example, will the customer renew his or her loan? Will
deposits and other sources of funds grow next month? Will the financial firms stock price
rise and its earnings increase? Are interest rates going to rise or fall next week?
Each of these forms of risk can threaten a financial firms day-to-day performance and its
solvency and long run survival. The types of risks are:
A. Credit risk
B. Liquidity risk

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C. Market risk
D. Operational (Transactional) risk
E. Legal and Compliance Risk
F. Reputation risk
G. Strategic risk
H. Capital risk
I. Other risk
To measure the extent of these risks I have used several ratios which are illustrated below
with values and graphs (where applicable). Also an excel spreadsheet is provided for detailed
computations of the ratios. The spreadsheet also contains the financial statements of MTBL
of the 3 years from 2010 to 2012, on which I have done the analysis.

4.8 Credit Risk
The probability that some of a financial firms assets, especially its loans will decline in value
and perhaps become worthless is known as credit risk. In simple words It is a risk that a
borrower will not pay a loan as called for in the original loan agreement, and may eventually
default on the obligation. Credit risk is one of the primary risks in bank lending, in addition to
Interest Rate Risk.(Answers.com, Banking Dictionary, 2013).
Credit risk is the risk of loss due to a debtor's non-payment of a loan or other line of credit-
either the principal or interest or both. Most financial firms (lenders) employ their own
models (credit scorecards) to rank potential and existing customers according to risk, and
then apply appropriate strategies and rates. With products such as unsecured personal loans or

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mortgages, lenders charge a higher price for higher risk customers and vice versa. With
revolving products such as credit cards and overdrafts, risk is controlled through the setting
of credit limits. Some products also require security, most commonly in the form of property.
Compared to other banks, MTBL does not have too much a record of Default loans, which
implies they have a well equipped management team and good handling power on loans.
Further statistical detail is given in the later part. The following are four of the most widely
used indicators of credit risk and I have used them to demonstrate a clear view of the Credit
Risk of MTBL.
The ratio of nonperforming assets to total loans and leases
The ratio of net charge-offs of loans to total loans and leases
The ratio of the annual provision for loans losses to total loans and leases or to equity
capital
The ratio of allowance for loan losses to total loans and leases or to equity capital
The ratio of nonperforming assets to equity capital
The ratio of total loans to total deposits
Nonperforming assets are income generating assets, including loans that are past due for 90
days or more. In other words they can be called doubtful loans in the sense that they are not
written off and there is still hope of getting it back. Charge offs, on the other hand are loans
that have been declared worthless and written off the lenders books which we mostly know
as bad loans or loan losses. If some of these loans ultimately generate income, the amounts
recovered are deducted from gross charge-offs to yield net charge-offs. As these ratios rise,
exposure to credit risk grows, and failure of a lending institution may be just around the
corner. The final two credit risk indicator ratios reveal the extent to which a lender is

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preparing for loan losses by building up its loan-loss reserves (the allowance for loan losses)
through annual charges against current income (the provision for loan losses). The last ratio
of total loans to total deposits is a very popular and long standing credit risk measure. It is an
alarming situation if this ratio grows because loans are usually among the riskiest of all assets
for depository institutions and therefore deposits must be carefully protected. A rise in bad
loans or declining market values of otherwise good loans relative to the amount of deposits
creates greater depositor risk.
year
Total Loans Total Deposits
Total Loans to Total
Deposits
2010 37,704,921,351 45,129,483,249 83.55%
2011 44,887,866,922 59,050,804,354 76.02%
2012 54,093,323,785 75,140,144,506 71.99%


Exhibit 1: Credit Risk 1
Explanation: As we know Loan-To-Deposit Ratio - LTD' is commonly used statistic for
assessing a bank's liquidity by dividing the banks total loans by its total deposits. This
66.00%
68.00%
70.00%
72.00%
74.00%
76.00%
78.00%
80.00%
82.00%
84.00%
2010 2011 2012
83.55%
76.02%
71.99%
Year
Toat Loans to Total Deposits

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number, also known as the LTD ratio, is expressed as a percentage. If the ratio is too high, it
means that banks might not have enough liquidity to cover any unforseen fund requirements;
if the ratio is too low, banks may not be earning as much as they could be.
Here we can see that, the LTD ratio of MTB was decreasing in 2012 compare to 2012, which
created an indication that earning of MTB had decreased as like other banks in 2012. On the
same way, MTB credit liquidity condition was much better in 2012 than 2010.
Year
Total Loans &
Advances
Annual
Provision For
Loans &
Advances
Equity
Capital
Credit Risk
(a)
Credit Risk
(b)
2010 5,738,964,774 508,837,012 4,163,403,283 8.87% 10.46%
2011 7,433,997,532 200,049,000 4,834,348,126 2.69% 4.14%
2012 9,505,597,361 455,657,130 4,863,104,870 4.79% 9.37%



Exhibit 2: Credit Risk (a)
8.87%
2.69%
4.79%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
2010 2011 2012
% Change in
Credit Risk
Year
Annual Provision For Loan & Advances
vs Total Loans & Advances
Credit Risk (a)

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Explanation: Since the ratio was lower in 2011 and bit higher in 2012, it was really good in
context of performance scenery in 2012. But in 2010 there was more than enough provision,
that wasrealy good and it made MTB negative chance to loan default.


Exhibit 3: Credit Risk (b)

4.9 Liquidity Risk:
Banks having insufficient cash to meet customers cash withdrawals, loan demands and other
cash needs is referred as Liquidity risk. Faced with liquidity risk a financial institution may
be forced to borrow emergency funds at excessive cost to cover its immediate cash needs,
reducing its earnings. However, very few financial firms ever actually run out of cash because
of the ease with which liquid funds can be borrowed from other institutions. I have used four
ratios to measure the exposure of MTBLs Liquidity risk.
Cash and Cash Equivalents to Total Assets
Purchased funds to Total Assets
Balance held at other Banks and Financial Institutions to Total Assets
Cash Assets and Government securities to Total Assets

0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2010
2011
2012
10.46%
4.14%
9.37%
% change in
Credit Risk
Year
Annual Provision for loans &
Advances vs Equity Capital
Credit Risk (b)

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Cash and Cash Equivalents include ready cash and quickest accessible assets like Cash in
hand (including foreign currency), cash with Bangladesh Bank and its Agent Banks. Also
balances in other financial institutions inside and outside Bangladesh are considered to be
comparatively liquid assets as they can be withdrawn if necessary yet banks do not usually do
this. Purchased funds comprise of Eurodollars or other currencies bought, government
securities, large CDs, Repurchase Agreements and Commercial Paper. (Rose & Hudgins,
2011-2012, p. 178). Lastly it includes Money at call or short notice. It includes funds lent to
discount houses, money brokers, the stock exchange, bullion brokers, corporate customers,
and increasingly to other banks. At call money is repayable on demand whereas short notice
money implies that notice of repayment of up to 14 days will be given. After cash, money at
call and short notice are the banks' most liquid assets. They are usually interest-earning
secured loans but their importance lies in providing the banks with an opportunity to use their
surplus funds and to adjust their cash and liquidity requirements.

All of the above items are done as a ratio of total assets of the bank. The more the ratio is,
more liquid is the bank. However too much liquidity is also not preferable as it means there is
a lot of idle cash which could be invested elsewhere and earn a substantial amount of interest.

Year Total Assets
Cash Assets & Govt.
Securities
Liquidity
Risk
2010 57,529,205,095 11,527,067,816 20.04%
2011 76,331,366,189 22,958,166,461 30.08%
2012 92,802,685,449 27,750,978,103 29.90%









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Exhibit 4: Liquidity Risk
Explanation: Cash and cash equivalents fell a little in every year but it did not increase the
liquidity risk of MTBL much as the other liquid assets had offset the impact. Purchased funds
are highest as we see in the graph in 2011and again in 2012. It is comparatively very low in
2010 because if you just go through the financial statement of MTBL or the ratios I have
calculated, you will find that it faced a big downfall in its profitability in the year 2011 and
thus it sold out a lot of their investments to meet up the target

4.10 Market Risk:
In market-oriented economies which we have in Bangladesh, the market values of assets,
liabilities and net worth of financial service providers are constantly in a state of flux due to
uncertainties concerning market rates or prices. Market risk is mainly determined by two
other risks which are Price Risk and Interest Rate Risk.
Price risk
The risk that the value of a security or portfolio of securities will decline in the future is
known to be as Price risk. Especially sensitive to these market value movements are bond
portfolios and stockholders equity (net worth), which can dive suddenly as market prices
move against a financial firm. Here the important indicators are:
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
2010 2011 2012
20.04%
30.08% 29.90%
% change in
Liquidity Risk
Year
Cash Assets & Govt. Securities vs Total
Assets
Liquidity Risk

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Book value of assets to market value of those same assets
Book value of Equity capital to its market value
Book value of Bonds to its market value
Explanation: This ratio could not be derived due to lack of accessibility of information. All
the assets are presented at the market value of the respective years. Neither the book value is
mentioned anywhere nor there is enough data to calculate it ourselves. Their depreciation
method which is straight line and the rate at which they depreciate each different category of
assets are given in note # 2.6, however I could not find out when exactly they bought which
asset and thus did not know how much depreciation to add back to find out the book value. It
is because there is no list provided of how many new assets are bought at each year and how
much they had previously and for what duration. What I could do is make a rough estimation
of the book value based on the market value, but since there is a concept of time value of
money, this estimation process would be very inaccurate.
Nevertheless we all understand that Price risk factor affects all firms of all categories no
matter how precautious they are. It is because Price is a Market Risk factor which falls under
the category of Unsystematic risk and thus it is not diversifiable. Moreover with an increasing
inflation rates we understand that the Price risk did exist in the firm.
Interest Rate Risk
The impact of changing interest rates on a financial institutions margin of profit is called
Interest rate risk. Rising interest rates can greatly diminish the profit of a financial institution
if the structure of the firms assets and liabilities is such that interest expense on borrowed
money increases more rapidly than interest revenues on loans and security investments. The
most important measures are as follows.
The ratio of interest-sensitive assets to interest sensitive liabilities
The ratio of uninsured deposits to total deposits
When Interest sensitive assets exceed interest sensitive liabilities in a particular maturity
range, a financial firm is vulnerable to losses from falling interest rates. In contrast, when rate
-sensitive liabilities exceed rate-sensitive assets, losses are likely to be incurred if market
interest rate rises.
.

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In a depository institution like banks, where uninsured deposits are usually government and
corporate deposits that exceed the amount covered by insurance and are usually so highly
sensitive to changing interest rates that they will be withdrawn if yields offered by
competitors rise even slightly higher. As I have gone through the notes of the financial
statements, I have not found any such uninsured deposits or likewise. Thus this ratio can be
state as 0 which means there is no risk of uninsured deposits at all.
Year 2012 2011 2010
Interest Sensitive Liabilities 73,555,048,289 59,103,065,084 45,316,571,485
interest Sensitive Assets 52,664,296,232 44,072,126,592 37,030,939,030
Interest Rate Risk 71.60% 74.57% 81.72%


Exhibit 5: Market Risk
Explanation: As I have calculated of MTBL, the ratio went down with quite an extent from
2006 to 2012. As we can see above (Exhibit: 4.4: Market Risk I). It implies that in the year
2010, interest sensitive assets were many compared to interest sensitive liabilities. In 2011 the
interest sensitive assets did not raise much but the interest sensitive liabilities rose
significantly thus making the overall ratio very low. In 2012 the ratio again fall.Therefore it
can be said that although the ratio fluctuated vigorously over the three years, MTBL reduced
its exposure to interest rate risk.
Interest Rate Risk
65.00%
70.00%
75.00%
80.00%
85.00%
2010
2011
2012
81.72%
74.57%
71.60%
% change in Interest
Rate Risk
Year
Interest Sensitive Assets vs Interest Sensitive
Liabilities

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With more volatile market interest rates in recent years, bankers have developed several new
ways to defend their earnings margins against interest rate changes, including interest rate
swaps, options, and financial future contracts. MTBL also have arranged these procedures to
prevent losses from interest rate fluctuation.

4.11 Operational (Transactional) Risk:
Operational risk refers to uncertainty regarding a financial firms earnings due to failure in
computer systems, errors, misconduct by employees, floods, strikes and similar events. The
broad group of actions in this risk definition often decreases earnings due to unexpected
operating expenses. Especially in Bangladesh it is the most common phenomenon. All the
banks both government and private use the computerized system along with heavy paper
works too.
As from my own experience in MTBL I have seen the computer systems involve a patchwork
of old programs, requiring employee intervention to reconcile and create reports. Also the
software system which MTBL uses named to be as Flora Systems fails quite often mostly
during day time putting a halt in all sorts of transactions. All these together make MTBLs
operational risk high thus making its earning low. Although I have seen this physically, I
could not put the extent of loss into numbers as it needs very thorough and detailed
information of everyday transaction which I did not have access to.

4.12 Legal and Compliance Risk
Legal or compliance risk creates variability in earnings resulting from actions taken by the
legal system. Unenforceable contracts, lawsuits or adverse judgments reduce a financial
firms earnings by increasing its expenses. For example, if a depository institution fails to
hold adequate capital; costly corrective actions must be taken to avoid its closure. Fortunately
MTBL neither had this sort of records during the time I worked there, nor in its history of
past ten years.




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4.13 Reputation Risk
Reputation risk is the uncertainty associated with public opinion. Negative publicity, whether
true or not, can affect a firms earnings by dissuading customers from using the services of
the institution, just as positive publicity may serve to promote a firms products and services.
I would say MTBL has a moderate amount of risk in this factor as it is neither too reputed nor
too badly reputed. As I believe the true nature of a financial firms business requires
maintaining the confidence of its customers and creditors, MTBL lacks a little bit at least in
the foreign exchange branch in which I have worked; although I am unaware of the other
branches. They have a few customers who are their only loyal and regular clients. New
customers are hardly seen at MTBL which I think is a big pull back for them. Other
commercial banks like Dutch Bangla Bank, Prime Bank, Brac Bank and a few others have a
good extent of reputation to attract new chunks of customers, which brings them a whole lot
of deposits. According to my limited point of view I think this factor is immensely pulling
back MTBL growth potentiality.
4.14. Strategic Risk
Variations in earnings due to adverse business decisions, improper implementation of
decisions, or lack of responsiveness to industry changes are parts of what is called Strategic
risk. This risk category can be characterized as the human element in making bad long-
range management decisions that reflect poor timing, lack of foresight, lack of persistence,
and lack of determination to be successful.(Rose & Hudgins,
2011-2012, p. 180)
With my limited knowledge and experience I could not find any wrong decisions made by the
officials rather I would say they have a very strong foresight of specific industry trends. No to
wonder as you will find out later in this report that they could very well figure out the
downfall of garments industry and accordingly they inclined more towards jute. Eventually
they did not face any loss due to recession and other international factors which most of the
other banks are still suffering.




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4.15 Capital Risk:
The impact of all the risks stated above can affect a financial firms long run survival, often
referred to as its capital risk. Actually capital risk is all those risks which drag a firm to the
limit of insolvency or ultimate failure. For example, if a bank takes on excessive amount of
bad loan s or if a large portion of its security portfolio declines in market value, generating
serious capital losses when sold, then its equity capital account, which is designed to absorb
such losses, may be overwhelmed. If investors and depositors become aware of the problem
and begin to withdraw their funds, regulators may have no choice but to declare the
institution insolvent and close its doors.
Measuring the capital risk is far more extensive job to be done by me but what I did is I have
used four ratios which will give not the exact but at least an approximation of the extent of
capital risk involved.
The ratio of stock price per share to annual earnings per share.
The ratio of equity capital (net worth) to total assets.
The ratio of purchased funds to total liabilities.
The ratio of equity capital to risk assets.
If the ratio of stock price per share to annual earnings per share falls it indicates that investors
have lost belief and thinks that the firm is undercapitalized relative to the risks it has taken
on. This is when investors sell the shares immediately keeping in mind the risk involved and
eventually the equity stops growing.
A decline in the second ratio which is equity capital (net worth) to total assets indicates that
the bank do not have enough assets for example loans and investments to earn a good return
for its shareholders.
The ratio of purchased funds to total liabilities: Purchased funds usually include uninsured
deposits and borrowings in the money market from bank and non-bank corporations and from
governmental units that fall due within one year.
The last ratio of Equity capital to risk assets reflects how well the current level of a financial
institutions capital covers potential losses from those assets most likely to decline in value.
Risk assets mainly consist of loans and securities and exclude cash, plant and equipment, and
miscellaneous assets.

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Some authorities also exclude holdings of short-term government securities from risk assets
because the market values of these securities tend to be stable and also there is always a ready
resale market for them.
Year EPS Stock Price
Stock Price Per
Share to EPS
2012 1.33 24.04
18.08
2011 2.5 37.6
15.04
2010 3.04 47.7
15.69


Exhibit 6: Capital Risk 1
Explanation: In Exhibit 6 we see that the stock price per share to earnings per share stroke
up highly in 2012 and remained almost constant also in 2010, 1011. While trying to figure out
the reason I found that in 2010 the stock price was moderate neither too high nor too low but
EPS in this year was very high. This factor boost up the stock price next year which is in
2012 but the EPS fell back and remained almost constant over the two year that is 2007 and
2008.
Therefore we can say this particular capital risk factor is low for MTBL.

Stock Price Per Share to EPS
0.00
5.00
10.00
15.00
20.00
2010 2011 2012
15.69
15.04
18.08
Year
Stock Price Per Share to EPS

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Year Total Assests Equity Capital
Equity Capital to
Total Assets
2010 57,529,205,095 4,163,403,283 0.07
2011 76,331,366,189 4,834,348,126 0.06
2012 92,802,685,449 4,863,104,870 0.05


Exhibit 7: Capital Risk 2
Explanation: This figure looks shocking and this is an alarming situation too since the firms
equity is declining drastically. It implies that the firm has assets but they are not earning
enough for its stockholders. The risk of MTBL can be sensed high for this scenario.







0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
2010
2011
2012
0.07
0.06
0.05
Year
Equity Capital to Total Assets

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4.16 Ratios to Measure Management Performance
Operating Efficiency Ratio: In a financial institution a greater efficiency in
operations is desired to attain maximum profit. This usually means reducing operating
expenses and increasing the firms employee productivity through the use of
automated equipments and improved employee training.

Employee Productivity Ratio: This measures the amount of net income per
employee. The less it is means that a greater amount is spend for the employees.

Earnings spread: The spread measures the effectiveness of a financial firms
intermediation function in borrowing and lending money and also the intensity of
competition in the firms market area. Greater competition tends to squeeze the
difference between average assets yields and average liability cost.

4.17 Other Risk Factors:
In a country like Bangladesh risks are many as I have mentioned many times. Risks like
Inflation risk, Currency or Exchange rate risk, Political risk and Crime risk can also greatly
affect a firms profit adversely. Though they are among the external market forces, they have
immense impact on any banks profitability. A few of the risks and their influence are listed
below.
Inflation Risk The possibility that the value of assets or income will decrease as
inflation shrinks the purchasing power of a currency. Inflation causes money to
decrease in value at some rate, and does so whether the money is invested or not.
Thus it erodes the actual value of a banks income. A rise in inflation negatively
affects a banks asset returns, lending capacity and profitability. Several economists
have found that countries with high inflation rates have inefficiently small banking
sectors and equity markets. (Sandra, 2010, p. 4). Although it is not true in case of this
country since Bangladesh has grown quite strong in the commercial banking sector.
At present the inflation rate of Bangladesh is 7.78% according to the statistics given
by Bangladesh Bank, which is quite high compared to other developing countries. Not
only MTBL, every financial firm has got an exposure to this risk.


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Currency or Exchange Rate Risk- Currency risk is a form of risk that arises from
the change in price of one currency against another. Whenever investors or companies
have assets or business operations across national borders, they face currency risk if
their positions are not hedged. (Hedge- An investment made in order to reduce the
risk of adverse price movements in a security, by taking an offsetting position in a
related security, such as an option or a short sale). MTBL is most exposed to this risk
as you already must have observed in the liquidity risk section that they invested the
most in purchased funds which includes purchase of foreign currencies like US
dollars and GBPs. Also from my personal experience I have seen that their major
transactions are export and import oriented which again involves a lot of exchange
rate risk.

Transaction risk is the risk that exchange rates will change unfavorably over
time. It can be hedged against using forward currency contracts.
Translation risk is an accounting risk, proportional to the amount of assets
held in foreign currencies. Changes in the exchange rate over time will render
a report inaccurate, and so assets are usually balanced by borrowings in that
currency.

Political Risk- Broadly, political risk refers to the complications businesses and
governments may face as a result of what are commonly referred to as political
decisionsor any political change that alters the expected outcome and value of a
given economic action by changing the probability of achieving business objectives.
There are both macro- and micro-level political risks.

Macro-level political risks have similar impacts across all foreign actors in a
given location. While these are included in country risk analysis, it would be
incorrect to equate macro-level political risk analysis with country risk as country
risk only looks at national-level risks and also includes financial and economic
risks.
Micro-level risks focus on sector, firm, or project specific risks.


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Crime Risk since Bangladesh has embraced automated banking system, financial
crime risk seemed to get a rise. It is associated with default, fraud, embezzlement,
theft and illegal acts. Iindividuals and organized crime groups have historically
targeted financial institutions to obtain account information and funds by exploiting
vulnerabilities through a variety of fraudulent schemes. The value of customer
information has been recognized by organized crime for many years with theft and or
compromise of customer sensitive information increasing at an alarming rate.
In these sorts of cases the financial firm may also be financially liable for losses incurred by a
third party as a result of breaches of your data security which result in losses by other
organizations. It also happens that failures in the systems and controls leads to criminally
derived funds being transacted through your firm could result in criminal prosecution or
regulatory sanctions on both the firm and individual employees including board members.
Moreover it destroys the reputation of the firm. Financial Crime occurs from two sources.
i. External- this is done by crime groups
ii. Internal- it is done solely by employees or by a combination of both employees and the
organized crime which is the most dangerous.
(All the results of the ratios have been rounded to 3 digits for the ease of understanding)











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4.18. Key Profitability Ratios:
4.18.1 Return on Equity Capital (ROE):
It is a measure of the rate of return flowing to shareholders. It approximates the net benefit
that the stockholders have received from investing their capital in the financial firm that is by
placing their funds at risk in the hope of earning a suitable profit..
Year
Net Income
Shareholders' Equity
ROE
2010 988,362,060 4,163,403,283 23.74%
2011 404,222,699 4,834,348,126 8.36%
2012 327,867,814 4,863,104,870 6.74%


Exhibit 8: Return on Equity


Explanation: the data and the graph both shows that Return on Equity in 2010 was quite high
compared to the other two years. In 2011, we can see a big downfall of return and then again
it rose a little bit in 2012.


ROE
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2010 2011 2012
23.74%
8.36%
6.74%
Year
Return On Equity

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4.18.2 Return on Assets (ROA):
Return on Assets is primarily an indicator of managerial efficiency which indicates how
capable management has been in converting assets into net earnings.
Year Net Income (tk) Total Assets (tk) ROA
2010 988,362,060 57,529,205,095 1.72%
2011 404,222,699 76,331,366,189 0.53%
2012 327,867,814 92,802,685,449 0.35%


Exhibit 9: Return on Asset
Explanation: Here also we see a common trend that is ROA is high in 2010, then a drop in
2011 followed by a slight drop again in 2012. Decline in ROA implies poor performance of
financial firms and in regard to that investors might drop out MTBL stock from their portfolio
basket.



ROA
0.00%
0.50%
1.00%
1.50%
2.00%
2010
2011
2012
1.72%
0.53%
0.35%
Year
ROA

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Break-down of ROA: I have broken down RAO into 3 important factors for better
understanding the scenario. They are:

Net Profit Margin- reflects effectiveness of expense management (cost control) and
service pricing policies. Financial institutions can increase their earnings and the
returns to their stockholders by successfully controlling their expenses and
maximizing revenues.

Asset Utilization- reflects portfolio management policies, especially the mix and
yield on assets. By carefully allocating assets to the highest yielding loans and
investments while avoiding excessive risks, management can raise the average yield
on assets.

Equity Multiplier- reflects leverage or financing policies or the sources chosen to
fund the financial institution that is debt or equity. The measure shows how many
dollars/taka of assets must be supported by each dollar/taka of equity (owners
capital) and how much of the firms financial resources, therefore must rest on debt.






Year Total Revenue Net Profit
Net Profit
Margin
Total Assets
Shareholders'
Equity
Equity
Multiplier
2010

6,608,566,329
988,362,060 0.150 57,529,205,095 4,163,403,283 13.818
2011

8,299,285,275
404,222,699 0.049 76,331,366,189 4,834,348,126 15.789
2012

10,236,941,512
327,867,814 0.032 92,802,685,449 4,863,104,870 19.083

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Exhibit 10: Break-Down of ROA
Explanation:
The figure here is very unclear since all the three factors could not be portrayed. Although
Net profit margin and Asset Utilization seem to be insignificant here but in reality they do
have effect on overall RAO. In the following years net profit margin is increasing which
means MTBLs operating expenditures is decreasing implying that operating efficiency is
improving.
Equity Multiplier has the highest value among all the components of ROA. Unlike all the
other components it rose in 2010 and dropped a little in 2011 and again dropped in 2012. It
implies MTBL assets are increasing.




0.000
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
18.000
20.000
2010
2011
2012
0.150
0.049
0.032
13.818
15.789
19.083
Year
Net Profit Margin
Equity Multiplier

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4.18.3 Debt Equity Ratio:
Year
Total Liabilities Shareholders' Equity
Debt Equity
Ratio
2010 53,150,374,266 4,163,403,283 12.77
2011 71,516,395,979 4,834,348,126 14.79
2012 87,939,580,579 4,863,104,870 18.08


Exhibit 11: Debt Equity Ratio
Explanation: Lower values of debt-to-equity ratio are favorable indicating less risk. Higher
debt-to-equity ratio is unfavorable because it means that the business relies more on external
lenders thus it is at higher risk, especially at higher interest rates. As we see here the ratio of
MTB was increasing from 2010 to 2012.
4.18.4. Debt Ratio:
The debt ratio compares a company's total debt to its total assets, which is used to gain a
general idea as to the amount of leverage being used by a company. A low percentage means
that the company is less dependent on leverage

Year
Total Liabilities Total Assets
Debt
Ratio
2010 53,150,374,266 57,529,205,095
0.924
2011 71,516,395,979 76,331,366,189
0.937
2112 87,939,580,579 92,802,685,449
0.948
Debt Equity Ratio
0.00
5.00
10.00
15.00
20.00
2010
2011
2012
12.77
14.79
18.08
Year
Debt Equity Ratio

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Exhibit 12: Debt Ratio
Explanation: As we see in the figure, MTBs debt ratio was increasing slightly from 2010 to
2012, which brought MTBs equity condition down. MTB was more using its leverage than its
equity.


4.18.5 Net Interest Margin:
A performance metric that examines how successful a firm's investment decisions are
compared to its debt situations. A negative value denotes that the firm did not make an
optimal decision, because interest expenses were greater than the amount of returns generated
by investments.
Year
Net Interest Income Interest Sensitive Assets Net Interest Margin
2010 1,245,105,235 47,005,479,862 2.65%
2011 887,695,989 39,676,121,484 2.24%
2012 850,993,829 56,511,077,223 1.51%



Debt Ratio
0.910
0.920
0.930
0.940
0.950
2010
2011
2112
0.924
0.937
0.948
Year
Debt Ratio

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Exhibit 13: Net Interest Margin
Explanation:
It shows that interest revenues in average earn quite bad for MTBL every year even though it
fluctuated over the years. In other words it can be said that their assets bring in less amount of
interest revenues for the firm.
4.18.6 Earning Per Share:

Exhibit 14: EPS
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2010
2011
2012
2.65%
2.24%
1.51%
Year
Net Interest Margin
EPS
0
1
2
3
4
2010
2011
2012
3.04
2.5
1.33
EPS
EPS

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Explanation:
Any downward trend in Earnings per Share (EPS) of any financial firm implies negative
issues about that particular firm. EPS declining means overall performance of the firm over
the year was not good enough thus could not provide its shareholders with a better return.
This is when stockholders loose trust and sell out their stocks making the overall companys
equity go down. MTBL is not giving as to what it used to give previously.




















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References:
1. Rose, Peter S, & Hudgins, Sylvia C. (2011-2012). Bank Management & Financial
Services. New York, NY: McGraw-Hill
2. Answers.com: Banking Dictionary. (20113). Retrieved August 22, 2013 from
Website: http://www.answers.com/topic/credit-risk
4. News Bangladesh, Economy of Bangladesh: The Banking System, ( 2012, Oct 25).
News Bangladesh Website http://www.bengaliwiki.com/page/The+Banking+System
5. Index Mundi, Bangladesh - Inflation rate (consumer prices) (%), (2012, January 1).
from Index Mundi website: http://www.indexmundi.com/g/g.aspx?c=bg&v=71

Bibliography:
1. www.mutualtrustbank.com/
2. Rose, Peter S, & Hudgins, Sylvia C. (2011-2012). Bank Management & Financial
Services. New York, NY: McGraw-Hill
3. Keown, Arthur J, Martin, John D, Petty, J William & JR, David F. Scott. (2012-2013).
Financial Management: Principles and Applications. New Jersey: Pearson Prentice Hall
4. www.thefinancialexpress-bd.com/
5. http://www.bangladeshbank.org.bd/
6. www.dsebd.org/
7. htp://www.investopedia.com






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