Understanding and Overcoming Adverse Economic Condition at National Bank Ltd.

Abstract

National Bank Limited (NBL) is a first generation private sector bank of Bangladesh, which started operation in 1983. This report is a follow-up of the three-month internship that the author of this report had done at the elephant road branch of the bank. Because of the limitations imposed by the lack of available information, efforts had been made to compile this report based mainly of secondary information. The current economic condition of the country is a vital part of this study as there had been a lot of changes in both domestic and international arena. The government has implemented change to the economic policy to deal with international problem, loss of export market, withdrawal of IMF support, etc. The changes in the banking sector include reforming nationalized commercial banks to make them more efficient and transparent, and to recover bad loans. The current Finance Minister has taken a tough stance against banks making unfair profit and made rule like withdrawal of funds from newer banks, ban on the use of foreign currency in cash reserve ratio, limitations on big loan disbursements, exclusion of defaulting bank directors, etc. More changes are on the way. NBL has a better financial base than before. Its asset, capital, loan and deposit all increased dramatically over the years. It profitability had been a little volatile, but efficiency ratios show good result. Its capital risk is a little high. The competitors of NBL are the first generation private banks like Arab Bangladesh Bank, the City Bank, IFIC Bank and UCBL. If financial analysis, it can be found that NBL has the largest assets, deposit, loan, and capital size within this group. Profitability had been volatile for everyone, but it had been a little better for NBL. The loan ratio shows that NBL depends less on deposits for sources of funds. Liquidity of NBL is lesser than others. But operating efficiency of NBL is the best among all. Its branch network and employee efficiency is the best, although the difference is slowly decreasing. The strengths of NBL include long-standing reputation, long experience of management, widespread branch network, big asset base, Western Union Money transfer, quality service, MasterCard and SWIFT services. Weaknesses include classified loans, partially computerized branches, and lack of company website, lack of diversified services, lack of dynamism, and lack of decoration. The opportunities for NBL include growing middle class base, increased remittances, opportunity of strategic alliance, government rule affecting newer banks and new rules curbing illegal remittance. The threats include new banks, adverse economic conditions, new services of other banks, expansion of other banks, government pressure to reduce interest rates, other banks improving loan quality and using high technology. The recommended plan of action include reduce classified loans, reduce dependence on foreign exchange business, form strategic alliances with other companies, introduce new services, make management more dynamic, make branches fully computerized, start company website, improve branch decorations, offer gifts to customers on special occasions and give more importance to remittance business. In conclusion, it can be said that if the management of NBL follows these steps they might get benefited in the unpredictable days ahead.