Agrani Bank improves performance under PWC management team
Sunday, 5 August 2007
A Z M Anas
Higher operating profits have enabled Agrani Bank to cut its funding cost by 91.98 per cent in 2005 and a further 8.71 per cent in 2006, thus showing a marked improvement in the financial performance of the once-troubled bank.
"Cost-to-income-ratio exhibited a strong decline by 91.98 per cent in 2005 and a further 8.71 per cent in 2006, due mainly to higher operating profitability," according to a special report.
The state-run commercial bank has continued to ring up profits since 2005, with churning out pre-tax operating profits worth Tk 33 billion last year.
"While Agrani had failed to achieve even Tk 1.0 billion in profits in the last 31 years, we were able to take it toward a higher profit trajectory," Agrani Bank's current chief executive officer Abu Naser Bukhtear Ahmed said.
"The bank earned operating profits in two years in a row. And this year's profit will be as high as Tk 5.0 billion," Naser told the FE.
The funding cost reduction has been attained by cutting high-cost deposit schemes, structural change in deposit mix and general reduction of interest rate on deposits, noted the special report prepared by PricewaterhouseCoopers (PwC).
The report documented the current performance of the bank and an overview of major performance and changes that have taken place since 2004 when the PwC team started its function at Agrani, a state-owned commercial bank. In 2004, the government had assigned the global consultancy firm's Hong Kong wing to reform and modernise the bank, making it suitable for eventual privatisation.
The current performance is a spectacular display of how a private management can make a big difference to the way the country's traditional banking system, controlled by the bureaucracy, operates.
The PwC report pointed out that even the commercial lender was able to jack up good loans by 9.2 per cent and reduce non-performing loans to 26.27 per cent in 2006.
The management advisory team (MAT), headed by chief executive officer Abu Naser Bukhtear Ahmed, has adhered to the bank rules by limiting new lending within the growth cap of 5.0 per cent per year.
The exposure to Bangladesh Petroleum Corporation (BPC), which was exempted from this cap, represented the bulk of new risk assets.
"The MAT took prudent steps to ensure that the BPC did not become a problem as had happened in the case of two other NCBs," the report maintained.
Similarly, Agrani Bank managed to significantly bring down the number of loss-incurring branches to 114 in 2006 from 446 in 2004. In 2004, the total number of bank branches across the country was 870, it was 865 in 2005 and 866 in 2006.
About capital shortfall, the report said: "Significant shortfall amount by Tk 3.1 billion from a base figure of Tk 24.6 billion as of December 2004 and the current shortfall is Tk 21.5 billion."
The other key indicators of the bank's performance include credit and risk management, internal audit, improved accounting and human resources development.
The report mentioned that return on assets improved by 18 per cent, from 1.06 per cent in 2005 to 1.25 per cent in 2006, said the report, adding net interest income during the year 2005 increased by Tk 2.57 million in comparison to a negative net interest income of Tk 1.95 billion in 2004.
Establishment of high-level governance and risk management structures and frameworks, including the creation of senior management committees, is another achievement of the advisory team.
The hired management team redesigned the credit functions and processes, developed scorecards for screening loan proposals and risk-grading existing borrowers.
It also developed and implemented a system for risk-grading treasury customers and determining appropriate counter-party exposure limits.
A substantial change has been brought about in internal audit, with audit divisions being now functionally reporting to the chief executive officer, thus achieving separation of duties.
"The bank is the only nationalised commercial bank (NCB) with clean audited statements since 2004," the report claimed.
Official data reveal that around 400 bank branches and one divisional office were audited in fiscal year 2006.
Similarly, accounts manual was developed and implemented, resulting in the financial statements being prepared in line with established norms of the International Accounting Standards (IAS).
Higher operating profits have enabled Agrani Bank to cut its funding cost by 91.98 per cent in 2005 and a further 8.71 per cent in 2006, thus showing a marked improvement in the financial performance of the once-troubled bank.
"Cost-to-income-ratio exhibited a strong decline by 91.98 per cent in 2005 and a further 8.71 per cent in 2006, due mainly to higher operating profitability," according to a special report.
The state-run commercial bank has continued to ring up profits since 2005, with churning out pre-tax operating profits worth Tk 33 billion last year.
"While Agrani had failed to achieve even Tk 1.0 billion in profits in the last 31 years, we were able to take it toward a higher profit trajectory," Agrani Bank's current chief executive officer Abu Naser Bukhtear Ahmed said.
"The bank earned operating profits in two years in a row. And this year's profit will be as high as Tk 5.0 billion," Naser told the FE.
The funding cost reduction has been attained by cutting high-cost deposit schemes, structural change in deposit mix and general reduction of interest rate on deposits, noted the special report prepared by PricewaterhouseCoopers (PwC).
The report documented the current performance of the bank and an overview of major performance and changes that have taken place since 2004 when the PwC team started its function at Agrani, a state-owned commercial bank. In 2004, the government had assigned the global consultancy firm's Hong Kong wing to reform and modernise the bank, making it suitable for eventual privatisation.
The current performance is a spectacular display of how a private management can make a big difference to the way the country's traditional banking system, controlled by the bureaucracy, operates.
The PwC report pointed out that even the commercial lender was able to jack up good loans by 9.2 per cent and reduce non-performing loans to 26.27 per cent in 2006.
The management advisory team (MAT), headed by chief executive officer Abu Naser Bukhtear Ahmed, has adhered to the bank rules by limiting new lending within the growth cap of 5.0 per cent per year.
The exposure to Bangladesh Petroleum Corporation (BPC), which was exempted from this cap, represented the bulk of new risk assets.
"The MAT took prudent steps to ensure that the BPC did not become a problem as had happened in the case of two other NCBs," the report maintained.
Similarly, Agrani Bank managed to significantly bring down the number of loss-incurring branches to 114 in 2006 from 446 in 2004. In 2004, the total number of bank branches across the country was 870, it was 865 in 2005 and 866 in 2006.
About capital shortfall, the report said: "Significant shortfall amount by Tk 3.1 billion from a base figure of Tk 24.6 billion as of December 2004 and the current shortfall is Tk 21.5 billion."
The other key indicators of the bank's performance include credit and risk management, internal audit, improved accounting and human resources development.
The report mentioned that return on assets improved by 18 per cent, from 1.06 per cent in 2005 to 1.25 per cent in 2006, said the report, adding net interest income during the year 2005 increased by Tk 2.57 million in comparison to a negative net interest income of Tk 1.95 billion in 2004.
Establishment of high-level governance and risk management structures and frameworks, including the creation of senior management committees, is another achievement of the advisory team.
The hired management team redesigned the credit functions and processes, developed scorecards for screening loan proposals and risk-grading existing borrowers.
It also developed and implemented a system for risk-grading treasury customers and determining appropriate counter-party exposure limits.
A substantial change has been brought about in internal audit, with audit divisions being now functionally reporting to the chief executive officer, thus achieving separation of duties.
"The bank is the only nationalised commercial bank (NCB) with clean audited statements since 2004," the report claimed.
Official data reveal that around 400 bank branches and one divisional office were audited in fiscal year 2006.
Similarly, accounts manual was developed and implemented, resulting in the financial statements being prepared in line with established norms of the International Accounting Standards (IAS).