Financial Management of Prime Bank Limited: Part 02

In this part of the "Financial Management of Prime Bank Limited" blog series the credit-deposit section is discussed. 

Composition of Credit

Table 6 shows the credit mix of PBL for 2010-14 in percentage.  It can be observed that the major areas of fund employment are Secured overdraft / Quard against TDR, Cash credit / Murabaha, and Loans (General) holding average 24.50%, 14%, and 20.73% respectively of total credit. Over the years, Loans (General) and Credit card are showing increasing trend where Loans against trust receipt, Payment against document, Lease finance, and SME loan are decreasing

Table 6: Composition of Loans, Advances and Lease / Investments (in percentage)
Particulars	2010	2011	2012	2013	2014	Average
Secured overdraft / Quard against TDR	21.22%	27.55%	25.08%	22.90%	25.73%	24.50%
Cash credit / Murabaha	13.73%	13.28%	14.86%	15.40%	12.75%	14.00%
Loans (General)	19.41%	16.89%	19.81%	22.55%	24.97%	20.73%
House building loans	3.16%	2.75%	2.36%	2.58%	2.52%	2.68%
Loans against trust receipt	18.18%	15.84%	11.55%	7.56%	5.19%	11.67%
Payment against document	0.68%	0.53%	0.44%	0.18%	0.09%	0.38%
Retail loan	8.55%	8.29%	7.37%	8.24%	8.79%	8.25%
Lease finance / Izara	5.56%	5.72%	5.33%	4.00%	3.42%	4.81%
Credit card	0.48%	0.57%	0.60%	0.71%	0.79%	0.63%
SME loan	1.00%	0.97%	0.64%	0.42%	0.53%	0.71%
Hire purchase	5.31%	5.42%	5.29%	5.39%	4.32%	5.15%
Other loans and advances	2.73%	2.19%	6.67%	10.07%	10.89%	6.51%
Total	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%

Composition of Deposit

From table 7 it can be observed that the maximum percentage of deposit of PBL is Term deposits / Mudaraba term deposits which are about 72.24% on average. After that, the Current / Al-wadeeah current deposits represent about 14.77% of total deposit portfolio where Savings bank / Mudaraba savings deposits hold about 11.35%. The higher term deposits indicates that bank has funds those can be employed in long term investment for higher return.

Table 7: Composition of Deposits and Other Accounts (in percentage)
	2010	2011	2012	2013	2014	Average
Current / Al-wadeeah current deposits	17.37%	14.79%	15.04%	13.18%	13.47%	14.77%
Bills payable	1.96%	1.87%	1.88%	1.03%	1.44%	1.64%
Savings bank / Mudaraba savings deposits	12.28%	11.23%	10.54%	10.46%	12.26%	11.35%
Term/ Mudaraba term deposits	68.39%	72.11%	72.54%	75.33%	72.84%	72.24%
Total	100.00%	100.0%	100.0%	100.0%	100.0%	100.0%

Credit- Deposit Spread Management

Table 8 shows the spread among credit return and deposit expense of PBL over 2010-14. The percentage return from credit and expense for deposit is showing increasing trend over years except 2014 when both have decreased. But PBL has always maintained higher return from credit than they’ve cost in deposit which results in positive spread for the five years.

Table 8: Spread Management of Credit and Deposit
	2010	2011	2012	2013	2014
Interest Income from Credit/Total Credit	10.16%	11.75%	13.78%	14.18%	12.35%
Interest Expense for Deposit/Total Deposit	5.94%	7.25%	8.22%	8.37%	7.31%
Spread	4.21%	4.50%	5.55%	5.81%	5.04%